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What Is Cap Rare, And Why Is It Important For An Investment Property?

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HOW TO CALCULATE CAP RATE ON A RENTAL PROPERTY

The formula for cap rate is simple: income minus expenses, divided by the purchase price.

Capitalization rate =

Net operating Income


Purchase price

SAMPLE CASH FLOW ANALYSIS

Income, expense, and cap rate calculation for an investment property.

Lorem Ipsum
Cost
Lorem Ipsum
$3,000
Lorem Ipsum
25%
Lorem Ipsum
$3,000
Lorem Ipsum
4.7%
Lorem Ipcum
Cost
Lorem Ipcum
$3,000
Lorem Ipcum
31%

HOW DO YOU ESTIMATE VACATION RENTAL OR AIRBNB EXPENSES AND OPERATING COSTS WHEN DETERMINING CAP RATE?

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nullam eget vulputate enim. Duis vitae eros vehicula, malesuada leo a, tincidunt justo. Sed vehicula metus nulla, non dignissim augue maximus nec. Quisque sollicitudin imperdiet massa, in sollicitudin arcu vulputate sit amet. In dapibus neque purus. Nam euismod id nisl sed consequat. Pellentesque interdum nisl eu iaculis faucibus. Cras elementum vitae turpis scelerisque scelerisque. Etiam commodo congue nibh, ac convallis magna. Pellentesque laoreet, velit sed viverra tincidunt, justo neque finibus magna, sit amet accumsan dolor augue non lectus. Aenean accumsan pretium est in bibendum. Duis facilisis ante quis justo semper, gravida sodales turpis feugiat. Sed quis lorem ac enim pharetra sollicitudin eget quis leo. Praesent bibendum diam eget viverra aliquet. Nunc mollis est sit amet ligula placerat, at venenatis tortor aliquam. Etiam a enim dignissim, euismod risus id, condimentum purus. Aenean aliquam interdum massa, eu sollicitudin nibh pulvinar eget. Ut gravida nunc in diam pharetra, sit amet ullamcorper dolor gravida. Proin a tincidunt ex, id facilisis purus.

WHICH IS BETTER: A HIGHER CAP RATE OR A LOWER CAP RATE?

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WHAT IS A GOOD CAP RATE FOR RENTAL PROPERTY?

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DOES CAP RATE TAKE INTO ACCOUNT APPRECIATION?

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WHAT IS CASH-ON-CASH RETURN?

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CAP RATE VS. CASH-ON-CASH RETURN

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Cap rate
Income after mortgage
Cash-on-cash return
$18,000
3%
($3,600)
(3.6%)
$24,000
4%
$2400
2.4%
$30,000
5%
$8,400
8.4%
$36,000
6%
$14,400
8.4%
$42,000
7%
$20,400
8.4%

DOWNLOAD OUR REAL ESTATE INVESTMENT CALCULATOR

Try crunching the numbers. Our calculator (XLS) factors in cap rate, cash on cash, annual net operating income, and more.

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VACATION HOMES CAP RATE FAQS

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OWNER TESTIMONIALS

  • 5

John Smith

My family had a very enjoyable, relaxing stay in your property. The house was beautiful, well equipped and designed for a large group. The kids had lots of fun playing in the game rooms and swimming in the pool. We are looking forward to our next trip!

November 1, 2021
  • 5

John Smith

My family had a very enjoyable, relaxing stay in your property. The house was beautiful, well equipped and designed for a large group. The kids had lots of fun playing in the game rooms and swimming in the pool. We are looking forward to our next trip!

November 1, 2021
  • 5

John Smith

My family had a very enjoyable, relaxing stay in your property. The house was beautiful, well equipped and designed for a large group. The kids had lots of fun playing in the game rooms and swimming in the pool. We are looking forward to our next trip!

November 1, 2021
  • 5

John Smith

My family had a very enjoyable, relaxing stay in your property. The house was beautiful, well equipped and designed for a large group. The kids had lots of fun playing in the game rooms and swimming in the pool. We are looking forward to our next trip!

November 1, 2021