How to Calculate Cap Rate and ROI with HELOC

[Alyssa Davis]

Currently analyzing a quad-plex deal for my parents. They own a house outright and are thinking about taking a HELOC to finance the 25% downpayment.

My Question: How do I account for the loan payment (PITI) they'd need to pay down the HELOC when thinking about Cap Rate, ROI, and determining if it's a good deal & strategy in general?

Cap Rate 
1. Should the loan payment for the HELOC be considered an expense when calculating NOI?

ROI
1. Should the loan payment for the HELOC be considered an expense and subtracted from cashflow?

2. How should I calculate "invested capital", when really they aren't paying anything out-of-pocket except closing costs? 

3. My assumption would just be to treat the loan payment as an expense that reduces cashflow and then the invested capital is just closing costs, but may be thinking about this incorrectly?