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Cap Rate Guides

Everything an investor needs to know about pricing a rental by its income, written to go with the calculator.

  1. What Is Cap Rate? The Yield That Prices Rental Property

    Cap rate is a property's net operating income divided by its price. What it measures, what it ignores, a worked example, why it moves opposite to price, and when it is the right number to use.

  2. Cap Rate Formula: How to Calculate NOI and Cap Rate Step by Step

    The cap rate formula and how to build net operating income line by line: gross income, vacancy, each operating expense, and what stays out. Three worked examples and the mistakes that inflate a cap rate.

  3. What Is a Good Cap Rate for Rental Property? Benchmarks by Market and Type

    A good cap rate is one at or above what comparable properties in the same market sell for. Where cap rates fall by market tier and property type, why they differ, and how to tell a good cap rate from an inflated one.

  4. Cap Rate vs Cash on Cash Return: The Property vs Your Deal

    Cap rate measures the property before financing. Cash on cash return measures your money after the loan. How each is calculated, why they diverge, what the gap says about leverage, and which to use for which decision.

  5. Cap Rate vs Gross Rent Multiplier: Screening Fast Without Getting Fooled

    Gross rent multiplier is price divided by annual rent, a screen that skips expenses. Cap rate divides NOI by price and includes them. How the two relate, how GRM maps to cap rate under typical expenses, and when the shortcut breaks.

  6. How to Value a Rental Property With Cap Rate (Income Approach)

    Value equals NOI divided by the market cap rate. How to find the market cap rate, build a defensible NOI, run the math, and use it to set an offer, price a sale, or see what a rent increase is worth.

  7. Cap Rates and Interest Rates: How the Spread Sets Property Prices

    Cap rates track interest rates with a lag and a spread. How the spread works, what happened when rates rose in 2022, why cap rates move less than mortgage rates, and what the spread means for a buyer today.

  8. How to Find NOI With a Cap Rate: Working the Formula Backwards

    How to find NOI with cap rate: multiply price by the rate. A $500,000 ask at a 6 cap needs $30,000 of NOI. Worked example, the rent it takes, and when to walk.

  9. Is Cap Rate Gross or Net? Which Expenses Belong in the Calculation

    Cap rate is net, not gross. See which expenses belong in NOI, why property taxes count and your mortgage does not, and how to audit a seller's numbers.

  10. Debt Constant Chart: Annual Loan Cost by Rate and Term

    A debt constant chart and mortgage constant table for 15 to 30 year loans at 4% to 8%, plus how to read the annual loan cost against a 5.78% cap rate.

  11. Cap Rate vs Discount Rate and IRR: One Year vs the Whole Hold

    Cap rate vs discount rate vs IRR: the cap rate is one year, the discount rate is every year, and the gap between them is growth. With a worked example.

  12. Cap Rate vs Yield and Yield on Cost: Pricing a Deal You Plan to Fix

    Cap rate divides NOI by price. Yield on cost divides it by everything you spend. How the two differ, how to work a value-add deal, and what spread to want.