Cap Rate, ROI and Capital Gain: the 3 metrics you need to master before investing

Cap Rate, ROI and Capital Gain: Learn how to read the key metrics before investing (explained with apples and pears)

Imagine you’re about to buy a car. You wouldn’t just stop at how nice it looks; you’d want to know how much gas it uses, how much it’s worth on the market and how much it might be worth in a few years.
It’s the same with real estate: it’s not enough that you like the property, you need to know if it’s a good investment.

At Onix Living, we believe that smart investing starts with real data and full transparency. That’s why we always show our clients clear figures, based on signed contracts and backed by reliable sources.

Today we are going to explain, with apples and oranges, three concepts that will help you make the best decision in your next investment: Cap Rate, ROI and Capital Gain, with real examples of our developments.

1. Cap Rate (or Capitalization Rate)

What it is:
The Cap Rate measures the annual profitability of a property only by what it generates in rents, without considering whether the value goes up or down. It is like asking, “If I buy it, how much does it leave me per year?”

Formula:
(Annual net rental income ÷ Purchase price) × 100

Real example (Onix Living Development – Aldea Savia):

• Vacation Rentals (Airbnb/Booking)

  • Average annual rate: $2,200/night

  • Occupancy: 60% (219 nights per year)

  • Net annual income: $340,000

  • Cap Rate: 10%.

• Long-term income

  • Monthly rent: $22,000

  • Occupancy: 100% Occupancy: 100% Occupancy: 100% Occupancy: 100% Occupancy: 100% Occupancy: 100% Occupancy

  • Net annual income: $237,600

  • Cap Rate: 7%.

Market references (source: JP Morgan Mexico):

Comparison with CETES (source: Banxico, 2025):

• 1-year CETES: ≈ 10% p.a. gross.

• Cap Rate Onix Living (vacation): 10% p.a. net

• Key difference: CETES is fixed and secure, but does not generate capital gains; an Onix Living property combines profitability with growth in value.

Why it matters:
If you are looking for constant income, the Cap Rate is your compass. And if it’s higher than the CETES or a safe bank investment, you’re looking at a property with high potential.

2. ROI (Return on Investment)

What it is:
ROI is the whole picture: add up the income you get plus the capital gain (the increase in value) and compare it to what you invested.

Formula:
((Rental income + Capital gain) ÷ Initial investment) × 100

Real example (Onix Living Development – Savia Village, 3-year vacation scenario):

• Accumulated rent: $1,020,000

• Estimated capital gain: $886,000 (8% annual)

• Total profit: $1,906,000

• ROI: 56% in 3 years

Market references (source: JP Morgan Mexico):

Friend’s recommendation:
Before you buy, make sure the developer really knows what they are talking about and can show you real numbers, not just pretty promises.
In the real estate market, a consistent annual ROI of more than 20% is rare.
If someone offers you a “guaranteed ROI” of 30% or more per year, stop and ask them to explain step-by-step how they calculate it.
At Onix Living, our projections are backed by signed contracts and historical results, not unrealistic estimates.

3. Capital gains

What it is:
It is the increase in value of a property over time due to its location, demand and development in the area.

Formula:
((Sales value – Purchase value) ÷ Purchase value) × 100

Real examples (Onix Living – Aldea Savia, based on signed contracts, accumulated capital gains):

• Department Phase 1 (2019 → 2025)

  • Purchase price: $1,500,000

  • Current price: $2,345,000

  • Increase: +56.33% total

  • Annual average: 9.39% Annual average: 9.39% Annual average: 9.39% Annual average: 9.39% Annual average: 9.39

• Tamay House (2019 → 2025)

  • Purchase price: $2,900,000

  • Current price: $4,800,000

  • Increase: +65.52% total

  • Annual average: 10.9%.

Market references:

Why it matters:
Equity is like compound interest in real estate: your property gains value without you having to lift a finger. And at Onix Living, our percentages are compounded and backed by signed contracts, not desk projections.

Onyx Council

Now that you know what Cap Rate, ROI and Capital Gain are, you have three compasses to evaluate any real estate investment.
At Onix Living we believe in certainty and transparency, that’s why all our data comes from real transactions, with documents to back them up.

Next time you are offered a property, ask them:

• What is the Cap Rate and how is it calculated?

• What ROI do you project and what data do you base it on?

• What has been the real capital gain in recent years?

With us, those answers will always be clear, with verifiable figures and a track record to back it up.