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;
border: 1px solid #e9ecef;
border-radius: 8px;
padding: 30px;
margin-bottom: 40px;
box-shadow: 0 4px 6px rgba(0,0,0,0.05);
}
.calculator-title {
text-align: center;
margin-bottom: 25px;
color: #2c3e50;
}
.form-group {
margin-bottom: 20px;
}
.form-group label {
display: block;
margin-bottom: 8px;
font-weight: 600;
color: #495057;
}
.input-wrapper {
position: relative;
}
.input-prefix {
position: absolute;
left: 12px;
top: 50%;
transform: translateY(-50%);
color: #6c757d;
}
.form-control {
width: 100%;
padding: 12px 12px 12px 30px;
box-sizing: border-box;
border: 1px solid #ced4da;
border-radius: 4px;
font-size: 16px;
}
.form-control:focus {
border-color: #4dabf7;
outline: none;
box-shadow: 0 0 0 3px rgba(77, 171, 247, 0.2);
}
.calc-btn {
width: 100%;
padding: 14px;
background-color: #228be6;
color: white;
border: none;
border-radius: 4px;
font-size: 18px;
font-weight: bold;
cursor: pointer;
transition: background-color 0.2s;
}
.calc-btn:hover {
background-color: #1c7ed6;
}
.results-box {
margin-top: 25px;
padding: 20px;
background-color: #fff;
border-left: 5px solid #228be6;
border-radius: 4px;
display: none;
}
.result-row {
display: flex;
justify-content: space-between;
margin-bottom: 10px;
padding-bottom: 10px;
border-bottom: 1px solid #eee;
}
.result-row:last-child {
border-bottom: none;
margin-bottom: 0;
padding-bottom: 0;
}
.result-label {
font-weight: 500;
color: #555;
}
.result-value {
font-weight: 700;
color: #2c3e50;
font-size: 1.1em;
}
.cap-rate-final {
font-size: 2em;
color: #228be6;
text-align: right;
}
.article-content {
background: #fff;
padding: 20px 0;
}
.article-content h2 {
color: #2c3e50;
margin-top: 30px;
}
.article-content p {
margin-bottom: 15px;
}
.example-box {
background-color: #e7f5ff;
padding: 15px;
border-radius: 6px;
margin: 20px 0;
}
function calculateCapRate() {
// Get input values
var propertyValueStr = document.getElementById('propertyValue').value;
var monthlyRentStr = document.getElementById('monthlyRent').value;
var annualExpensesStr = document.getElementById('annualExpenses').value;
// Validate inputs
if (propertyValueStr === "" || monthlyRentStr === "" || annualExpensesStr === "") {
alert("Please fill in all fields to calculate the Cap Rate.");
return;
}
var propertyValue = parseFloat(propertyValueStr);
var monthlyRent = parseFloat(monthlyRentStr);
var annualExpenses = parseFloat(annualExpensesStr);
// Logic check to prevent NaN or division by zero
if (isNaN(propertyValue) || isNaN(monthlyRent) || isNaN(annualExpenses) || propertyValue <= 0) {
alert("Please enter valid positive numbers. Property value must be greater than zero.");
return;
}
// Calculations
var grossAnnualIncome = monthlyRent * 12;
var noi = grossAnnualIncome – annualExpenses;
// Cap Rate Formula: (NOI / Property Value) * 100
var capRate = (noi / propertyValue) * 100;
// Formatting output
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
// Update DOM
document.getElementById('resAnnualIncome').innerHTML = formatter.format(grossAnnualIncome);
document.getElementById('resAnnualExpenses').innerHTML = formatter.format(annualExpenses);
document.getElementById('resNOI').innerHTML = formatter.format(noi);
document.getElementById('resCapRate').innerHTML = capRate.toFixed(2) + "%";
// Show results
document.getElementById('resultsDisplay').style.display = 'block';
}
Understanding the Capitalization Rate (Cap Rate)
For real estate investors, the Capitalization Rate, or Cap Rate, is one of the most fundamental metrics used to evaluate the potential return on an investment property. Unlike other metrics that might factor in mortgage financing, the Cap Rate looks strictly at the property's ability to generate revenue in relation to its price.
What is Cap Rate?
The Cap Rate measures the annual rate of return on a real estate investment property based on the income the property is expected to generate. It essentially answers the question: "If I bought this property with all cash, what percentage of my investment would I earn back in profit each year?"
It is primarily used to:
- Compare the relative value of different investment properties.
- Assess the risk level of a potential investment (higher cap rates generally imply higher risk).
- Estimate the time it will take to recover the initial investment.
The Cap Rate Formula
The formula for calculating Cap Rate is straightforward but requires accurate inputs regarding the property's finances.
Cap Rate = (Net Operating Income / Current Market Value) × 100
Where:
- Net Operating Income (NOI): This is your annual rental income minus all operating expenses (taxes, insurance, maintenance, management fees). Note: NOI does not include mortgage payments or capital expenditures (like replacing a roof).
- Current Market Value: The present value of the property or the purchase price you are negotiating.
Example Calculation
Let's say you are looking at a single-family rental home listed for $300,000.
1. Calculate Income: The property rents for $2,500 per month.
$2,500 × 12 = $30,000 Gross Annual Income.
2. Calculate Expenses: The annual taxes, insurance, and maintenance costs total $8,000.
$30,000 (Income) – $8,000 (Expenses) = $22,000 NOI.
3. Calculate Cap Rate: Divide the NOI by the Purchase Price.
($22,000 / $300,000) = 0.0733.
Result: The Cap Rate is 7.33%.
What is a "Good" Cap Rate?
A "good" cap rate is subjective and depends heavily on the location and condition of the property. Generally:
- 4% – 5%: Common in high-demand, low-risk areas (like city centers) where property appreciation is the main goal.
- 6% – 8%: Often considered a balanced target for residential rentals in stable suburban neighborhoods.
- 8% – 10%+: Can be found in riskier areas or rural locations, offering higher immediate cash flow but potentially lower appreciation or higher vacancy risks.
Use the calculator above to quickly analyze potential deals and filter out properties that don't meet your investment criteria.