Use this Cap Rate Calculator, capitalization rate calculator, cap rate estimator, investment property calculator, real estate ROI calculator calculator for quick, clear estimates. Try a tiny example to see the impact of each input.
Q: What is a capitalization rate (Cap Rate)?
A capitalization rate (Cap Rate) is a financial metric used in real estate to indicate the rate of return on a rental property based on its expected net operating income. It’s often used to estimate an investor’s potential return.
How is Cap Rate calculated?
Cap Rate is calculated by dividing the property’s Net Operating Income (NOI) by its current market value or purchase price. The formula is: Cap Rate = Net Operating Income / Current Market Value.
What is a good Cap Rate for an investment property?
A “good” Cap Rate for an investment property varies depending on the property type, location, market conditions, and investor risk tolerance. Generally, higher cap rates indicate a potentially higher return but might also suggest higher risk.
Why is Cap Rate important for real estate investors?
Cap Rate is important for real estate investors as it provides a quick way to compare the relative value and potential return of different investment properties, helping them make informed decisions about acquisitions and sales.