Compare income properties on the same footing with net operating income and cap rate. The capitalization rate is the fastest way to compare income properties: it shows the yearly return a property produces on its price before financing. The DealWorthIQ cap rate calculator turns income and expenses into NOI and cap rate, with monthly figures and guidance on what the result means.
Divide the property's net operating income by its value or purchase price. A property with $31,200 of NOI and a $425,000 price has a cap rate of about 7.3%.
It depends on the market and property type. Stable properties in strong locations often trade at 4% to 6%, while higher cap rates can mean more income or more risk. Compare against similar properties in the same area.
No. Cap rate ignores financing. To see the return on your own cash after loan payments, use a cash-on-cash return or the BRRRR calculator.