Cap Rate Calculator Online

The Capitalization Rate, or Cap Rate, is a fundamental metric used in the real estate industry to evaluate the profitability and risk associated with an investment property. The Cap Rate Calculator simplifies this process by providing a quick, numeric assessment of a property's potential. It calculates the relationship between the Net Operating Income (NOI) and the Property Value.

Formula

The Cap Rate Calculator uses the following formula:

Cap Rate = (Net Operating Income / Property Value) * 100

Net Operating Income (NOI) is calculated by subtracting the Operating Expenses from the Rental Income.

Now, let's take a look at some general terms that you might encounter when using the Cap Rate Calculator:

Term	Definition
Net Operating Income	The total income generated by a property minus the costs of operation. This is the property's profitability.
Property Value	The current market value of the property, often the purchase price.
Rental Income	The total income generated from renting the property to tenants.
Operating Expenses	The costs incurred to maintain and manage the property. This includes property taxes, insurance, maintenance, and management fees.

Example of Cap Rate Calculator

Let's consider a practical example to understand how the Cap Rate Calculator works:

Suppose you have an investment property with a Rental Income of $50,000 and Operating Expenses of $15,000. The Property Value is estimated at $500,000.

Using the Cap Rate formula:

Cap Rate = ($50,000 - $15,000) / $500,000 * 100 Cap Rate = ($35,000 / $500,000) * 100 Cap Rate = 7%

In this scenario, the Cap Rate for the property is 7%.

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