How to Calculate Cap Rate

Are you interested in rental properties and want to know how to calculate cap rate? Or maybe you own some already but want to track your costs more effectively? The formula is pretty straight forward:

Annual Rental Income Minus Annual Expenses Equals Net Operating Income. Net Operating Income (or NOI) divided by Sales Price Equals Cap Rate.

The video below will help you figure out how to calculate the cap rate on any given property. But, remember Cap Rate is not the same as Return on Investment or ROI. Cap Rates vary from market to market and from property type to property type. If you know the Cap Rate of what a certain property is selling for in a certain area, then you can use that to measure against properties you are looking for.

Here’s a video to explain how to calculate Cap Rate.

Want a great software program to help analyze your real estate deals even better? Check out this program from Daniil Kleyman of True Vision Analytics. I use both of his programs, RentalValuator and RehabValuator. They are very detailed, but still pretty easy to use. I recommend the premium version for all of the upgraded reporting and using the tutorials, which will show you things like a Cash Out Refi Analysis. Also, his flipping version, RehabValuator, has a formula that calculates the ideal acquisition price for any flip deal, so you never overpay for a property.

If you have questions about getting started in Investment Property or would like some assistance finding your next killer piece of your portfolio, contact us here at Snipes Properties either through this website or calling (804) 482-4200.

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