Cap Rate Examples
The Capitalization Rate (Cap Rate) is a critical tool for real estate investors, providing a snapshot of a property's income-generating ability relative to its market value. Calculated by dividing the Net Operating Income (NOI) by the property's current market value, it helps in quickly comparing investment opportunities and assessing market sentiment. Understanding cap rates allows investors to make smarter, data-driven decisions.
Worked Examples
See the inputs and outcome together
Each scenario keeps the starting point, the outcome, and the actual lesson in one place so the page reads like a decision notebook, not a data dump.
- 1
Baseline case
Run the default sample case before changing anything else.
The calculator lands with noi at 22,200 and cap rate at 7.40%.
Property Value
$300,000
Gross Rental Income
$36,000
Vacancy Pct
5.00%
Operating Expenses
12,000
Property Value is worth watching because it moves noi fastest in this scenario.
- 2
Higher Property Value
Increase property value while keeping the rest of the case steady.
The calculator lands with noi at 22,200 and cap rate at 6.43%.
Property Value
$345,000
Gross Rental Income
$36,000
Vacancy Pct
5.00%
Operating Expenses
12,000
Property Value is worth watching because it moves noi fastest in this scenario.
- 3
Lower Gross Rental Income
Reduce gross rental income while keeping the rest of the case steady.
The calculator lands with noi at 17,070 and cap rate at 5.69%.
Property Value
$300,000
Gross Rental Income
$30,600
Vacancy Pct
5.00%
Operating Expenses
12,000
Gross Rental Income is worth watching because it moves noi fastest in this scenario.
- 4
Higher Vacancy Pct
Increase vacancy pct while keeping the rest of the case steady.
The calculator lands with noi at 21,570 and cap rate at 7.19%.
Property Value
$300,000
Gross Rental Income
$36,000
Vacancy Pct
6.75%
Operating Expenses
12,000
Vacancy Pct is worth watching because it moves noi fastest in this scenario.
Patterns
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Sources & References
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