body {
font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif;
line-height: 1.6;
color: #333;
max-width: 800px;
margin: 0 auto;
padding: 20px;
}
.calculator-container {
background-color: #f8f9fa;
padding: 30px;
border-radius: 12px;
box-shadow: 0 4px 6px rgba(0,0,0,0.1);
margin-bottom: 40px;
border: 1px solid #e9ecef;
}
.form-group {
margin-bottom: 20px;
}
.form-group label {
display: block;
margin-bottom: 8px;
font-weight: 600;
color: #2d3748;
}
.input-wrapper {
position: relative;
}
.input-wrapper input {
width: 100%;
padding: 12px 15px;
border: 2px solid #cbd5e0;
border-radius: 6px;
font-size: 16px;
transition: border-color 0.2s;
box-sizing: border-box;
}
.input-wrapper input:focus {
border-color: #4299e1;
outline: none;
}
.currency-symbol, .percent-symbol {
position: absolute;
top: 50%;
transform: translateY(-50%);
color: #718096;
font-weight: bold;
}
.currency-symbol { left: 10px; }
.percent-symbol { right: 25px; }
.input-with-currency { padding-left: 25px !important; }
.btn-calculate {
background-color: #2b6cb0;
color: white;
border: none;
padding: 15px 30px;
font-size: 18px;
font-weight: bold;
border-radius: 6px;
cursor: pointer;
width: 100%;
transition: background-color 0.2s;
}
.btn-calculate:hover {
background-color: #2c5282;
}
.result-section {
margin-top: 25px;
padding: 20px;
background-color: #fff;
border-radius: 8px;
border-left: 5px solid #2b6cb0;
display: none;
}
.result-row {
display: flex;
justify-content: space-between;
margin-bottom: 10px;
padding-bottom: 10px;
border-bottom: 1px solid #edf2f7;
}
.result-row:last-child {
border-bottom: none;
margin-bottom: 0;
padding-bottom: 0;
}
.result-label {
color: #718096;
font-weight: 500;
}
.result-value {
font-weight: 700;
font-size: 1.1em;
color: #2d3748;
}
.final-result {
margin-top: 15px;
padding-top: 15px;
border-top: 2px solid #e2e8f0;
}
.final-result .result-value {
font-size: 2em;
color: #2b6cb0;
}
.article-content h2 {
color: #2c5282;
margin-top: 30px;
border-bottom: 2px solid #e2e8f0;
padding-bottom: 10px;
}
.article-content h3 {
color: #2d3748;
margin-top: 25px;
}
.formula-box {
background-color: #edf2f7;
padding: 15px;
border-radius: 6px;
font-family: monospace;
text-align: center;
margin: 20px 0;
font-size: 1.1em;
}
.example-box {
background-color: #fff;
border: 1px solid #e2e8f0;
padding: 20px;
border-radius: 8px;
margin: 20px 0;
}
@media (max-width: 600px) {
.calculator-container { padding: 20px; }
}
function calculateCapRate() {
// 1. Get Input Values
var propertyValue = parseFloat(document.getElementById('propertyValue').value);
var grossIncome = parseFloat(document.getElementById('annualGrossIncome').value);
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value);
var expenses = parseFloat(document.getElementById('annualExpenses').value);
// 2. Validate Inputs
if (isNaN(propertyValue) || propertyValue <= 0) {
alert("Please enter a valid Property Value.");
return;
}
if (isNaN(grossIncome) || grossIncome < 0) {
alert("Please enter valid Gross Income.");
return;
}
if (isNaN(expenses) || expenses < 0) {
expenses = 0;
}
if (isNaN(vacancyRate) || vacancyRate < 0) {
vacancyRate = 0;
}
// 3. Logic Calculations
// Effective Gross Income = Gross Income – (Gross Income * Vacancy Rate / 100)
var vacancyLoss = grossIncome * (vacancyRate / 100);
var effectiveGrossIncome = grossIncome – vacancyLoss;
// Net Operating Income (NOI) = Effective Gross Income – Operating Expenses
var noi = effectiveGrossIncome – expenses;
// Cap Rate Formula: (NOI / Property Value) * 100
var capRate = (noi / propertyValue) * 100;
// 4. Update UI
document.getElementById('resultSection').style.display = 'block';
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
document.getElementById('displayEffectiveIncome').innerHTML = formatter.format(effectiveGrossIncome);
document.getElementById('displayNOI').innerHTML = formatter.format(noi);
// Formatting Cap Rate with 2 decimal places
document.getElementById('displayCapRate').innerHTML = capRate.toFixed(2) + "%";
}
Example of Cap Rate Calculation: A Comprehensive Guide
Understanding the Capitalization Rate, or "Cap Rate," is fundamental for any real estate investor. It acts as a thermometer for the potential return on an investment property, regardless of how the purchase is financed. This guide provides a detailed example of a cap rate calculation, breaking down the formula and logic to help you assess property deals effectively.
What is Cap Rate?
The Capitalization Rate is a metric used to evaluate the profitability and return potential of a real estate investment. It represents the ratio between the Net Operating Income (NOI) produced by the asset and its original capital cost (or current market value).
Unlike Cash-on-Cash return, Cap Rate ignores debt service (mortgage payments). This makes it an excellent tool for comparing the raw profitability of two different properties without the variable of financing structures.
Cap Rate = (Net Operating Income / Property Value) × 100
Step-by-Step Example of Cap Rate Calculation
To truly understand how this metric works, let's walk through a realistic example using a small multi-family property.
Scenario: The "Elm Street Fourplex"
Imagine you are looking to purchase a four-unit apartment building listed for $800,000.
Step 1: Determine Gross Annual Income
First, calculate the total potential income if the property were fully occupied 100% of the time.
- Rent per unit: $1,500/month
- Total monthly rent: $1,500 × 4 units = $6,000
- Gross Annual Income: $6,000 × 12 months = $72,000
Step 2: Account for Vacancy
Properties are rarely 100% occupied forever. Tenants move out, and units need turnover time. We will assume a 5% vacancy rate.
- Vacancy Loss: $72,000 × 0.05 = $3,600
- Effective Gross Income: $72,000 – $3,600 = $68,400
Step 3: Calculate Operating Expenses
Operating expenses include costs required to run the building but exclude mortgage payments. For our example:
- Property Taxes: $9,000
- Insurance: $2,500
- Maintenance & Repairs: $5,000
- Property Management (8%): $5,472
- Utilities: $2,000
- Total Annual Expenses: $23,972
Step 4: Determine Net Operating Income (NOI)
Now, subtract the expenses from the effective income.
NOI = Effective Income – Operating Expenses
NOI = $68,400 – $23,972
NOI = $44,428
Step 5: Final Calculation
Finally, divide the NOI by the property value (purchase price) to find the Cap Rate.
Cap Rate = ($44,428 / $800,000) × 100
Cap Rate = 5.55%
Interpreting the Result
In our example, the Cap Rate is 5.55%. What does this mean?
- Return on Investment: If you bought this property with all cash (no loan), your annual return on investment would be approximately 5.55%.
- Risk Assessment: Generally, a higher Cap Rate implies higher risk or a lower-demand area, while a lower Cap Rate often indicates a stabilized asset in a high-demand area.
- Market Comparison: If similar properties in the neighborhood are selling at a 4% Cap Rate, this property at 5.55% might be a good deal (undervalued). If the market average is 8%, this property might be overpriced.
Why Does Cap Rate Matter?
Investors use this calculation to quickly filter potential deals. If your investment goal is a minimum 6% return, the Elm Street Fourplex at 5.55% would be rejected immediately, or it would serve as a signal that you need to negotiate the purchase price down to achieve your target yield.
For instance, to achieve a 6% Cap Rate on the same NOI ($44,428), the purchase price would need to be:
Target Price = NOI / Target Cap Rate = $44,428 / 0.06 ≈ $740,466
Using the calculator above allows you to manipulate these variables—Purchase Price, Income, and Expenses—to see how different scenarios affect your investment metrics.