@Randall Cornelison you can mathematically determine which is better by doing a discounted cash flow analysis on the two.

Though the tenant has yet to make a specific mathematical proposal, he has left almost a $1k past due with the water dept as the lease comes to a close and has proposed that this is the amount for making it right.

It is technically true that you won't see a mathematical "gain" for several months or even years depending on the situation, but a lower rate will immediately increase your cash flow each month which could be a good benefit.

So based off this is it possible to show how a cap rate of 8 would mathematically play out?  

Hello Mohammed, Using an IRR calculation is the right approach, but keep in mind that new development projects are more risky and should therefore demand a higher IRR.Technically the payback period is an actual mathematical calculation that is used to help validate a project's feasibility.

@Ryan MattsonMy degree is in Mathematics.

So mathematically, if I had one property cash at 500K getting 10% cash on cash, and I had 2 properties with a mortgage 250K each, it would return a less cash on cash percentage on the same 500K cash I have in the deals.

As they say, all of the casinos on the Strip were built from people who had a system to beat mathematics and lost. 

This is not a good investment property at this time and needs to be off loaded so you can invest in something with positive cash flow.I know you are going to suggest you have positive cash flow but mathematically, with your present position on this property, that is impossible.

Is there a mathematical way for me to bridge the difference?