Calculate the Capitalization Rate (CAP Rate)


1. Property Price ($):

2. NOI Calculation

Gross Income ($):

- Taxes ($):

- Maintenance ($):

- Utilities ($):

- Insurance ($):

- Property Manager ($):

- Other Costs ($):


CAP Rate is used to compare the attractiveness of similar properties and can be calculated when you know the net operating income and property price.

CAP Rate = NOI (Net Operating Income) / Property Price

1. Property Price: What is the price of the property? For how much is it being sold?

2. Let's calculate the Net Operating Income (NOI)

NOI Calculation
Gross Income
-Taxes
-Maintenance
-Utilities
-Insurance
-Property Manager
-Other Costs
(does not include: deprecation, income tax or costs of debt servicing)


Fun Facts about CAP Rates

- Used to value a property (Property Value = NOI / CAP rate);
- Applies only to income producing properties;
- The higher the CAP rate the more cash flow the buyer get for each dollar invested;
- Usually a region and property type will have a standard CAP rate;
- Helpful in comparing attractiveness of similar properties;
- Brokers selling property should have the CAP rate;