Cap rate grades the building. Cash-on-cash grades your deal on that building. Same property, same day, and the two numbers can be nowhere near each other.
A $400,000 rental produces $28,000 of net operating income a year. Divide one by the other and the cap rate is 7.0%. That number describes the building and nothing else — it assumes you paid all cash, and it would be identical whether you borrowed nothing or borrowed 90%. It's a property metric, not a you metric.
— Educational, not financial advice.