Yield

Yield measures the income an asset pays over a stretch of time as a percent of what it cost or what it is worth. Cash on cash return is the cash yield on the equity in a rental. Cap rate is the cash yield on the whole property before financing.

The two yields on the default deal are 6.3% on your $150,000 and 8.0% on the $500,000 property. Bond buyers use the same idea: a $1,000 bond paying $50 a year yields 5%. Framing a rental this way makes it easy to compare with other income investments.

Yield is income only. It leaves out appreciation, loan paydown and tax effects, which is where much of a rental's total return can come from. A low-yield property in a fast-growing area and a high-yield property in a flat one can end up with similar total returns.

Further reading: Yield on Wikipedia.