Just to better understand

[Josh Williams]

I was told in a previous post that CAP is irrelevant when evaluating a SFH, if I understood correctly.

But I still want to understand it.

About to cash-out on current residence

Refi at 135K
Insurance and taxes wrapped into mortgage $770 w/ 3.73% int
Rent $1100

Do get the CAP I would $1100 X 12 - 15% (vacancy & maintenance)=$11220

$11220/135K=8.31% CAP???

[Ned Carey]

Anyone that tells you cap rate is irrelevant for a SFH is a MORON. Cap rate is one tool to measure financial performance of a property. Yes the industry does not use "cap Rate" on 1-4 unit properties. That does not mean you should not use it as a tool. Why would you ignore a tool to help you evaluate a property? 

In your calculations above you are grossly underestimating your expenses.  Expenses other than financing cost are typically 50%. In your calculation above you had vacancy and maintenance but you left out, taxes, insurance, management, tenant placement, legal costs accounting costs, holding costs while vacant, turnover costs, reserves for capital expenses. licenses and registrations etc.., etc.