Cap Rate Calculator
This calculator helps real estate investors determine the capitalization rate (Cap Rate) of a property. It's essential for evaluating investment potential and comparing properties.
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Data Source and Methodology
All calculations are based on standard real estate investment formulas. For more detailed information, consult the official real estate investment guides.
The Formula Explained
The Cap Rate is calculated as follows:
$$ \text{Cap Rate} = \frac{\text{Net Operating Income (NOI)}}{\text{Property Value}} \times 100\% $$
Glossary of Variables
- Net Operating Income (NOI): The annual income generated by the property after operating expenses.
- Property Value: The current market value of the property.
How It Works: A Step-by-Step Example
Suppose a property has a Net Operating Income of $50,000 and a Property Value of $800,000. The Cap Rate would be calculated as:
$$ \frac{50000}{800000} \times 100\% = 6.25\% $$
Frequently Asked Questions (FAQ)
What is Cap Rate?
Cap Rate is a metric used to assess the profitability of a real estate investment.
How do I use the Cap Rate Calculator?
Input the Net Operating Income and Property Value to get the Cap Rate.
What is a good Cap Rate?
A good Cap Rate depends on the market and investment strategy, typically ranging from 4% to 10%.