13.50 Cap Rate Calculator

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13.50% Cap Rate & Property Valuation Calculator

Analysis Results

Net Operating Income (NOI):

Current Cap Rate:

Value at 13.50% Cap:

NOI Needed for 13.50%:

function calculateCapRate() { var price = parseFloat(document.getElementById('propValue').value); var income = parseFloat(document.getElementById('grossIncome').value); var expenses = parseFloat(document.getElementById('opExpenses').value); var target = parseFloat(document.getElementById('targetCap').value) / 100; if (isNaN(price) || isNaN(income) || isNaN(expenses) || price = 13.50) { verdict.innerHTML = "This property is currently performing at or above the 13.50% cap rate threshold."; } else { var diff = 13.50 – currentCap; verdict.innerHTML = "This property is performing " + diff.toFixed(2) + "% below the 13.50% target. To reach this rate, the purchase price would need to be " + document.getElementById('resTargetValue').innerHTML + "."; } document.getElementById('results').style.display = 'block'; }

Understanding the 13.50 Cap Rate in Real Estate

A 13.50% Capitalization Rate (Cap Rate) is a significant metric in commercial real estate, representing a high-yield investment. The cap rate is calculated by taking the property's Net Operating Income (NOI) and dividing it by the current market value or purchase price.

The 13.50% Cap Rate Formula

To determine the value or the rate of return, we use the basic cap rate equation:

Cap Rate = (Net Operating Income / Property Value) × 100

When solving specifically for a 13.50 cap rate, the formulas are:

  • Required Value: Property Value = NOI / 0.1350
  • Required NOI: NOI = Property Value × 0.1350

Why Target a 13.50% Cap Rate?

In the current real estate market, a 13.50% cap rate is considerably higher than the national average for Class A office spaces or luxury multifamily units. Investors typically see 13.50% in the following scenarios:

  • High-Risk Markets: Properties located in secondary or tertiary markets where economic growth is slower.
  • Value-Add Opportunities: Properties that require significant renovation or have high vacancy rates.
  • Specialized Asset Classes: Certain industrial warehouses, self-storage facilities in rural areas, or older retail strips.
  • Economic Shifts: During periods of high interest rates, cap rates often expand to maintain a healthy risk premium over the risk-free rate (like Treasury bonds).

Real-World Example Calculation

Imagine you are looking at a small industrial flex space with the following financial profile:

  • Gross Annual Income: $150,000
  • Annual Operating Expenses: $45,000
  • Net Operating Income (NOI): $105,000

To find the maximum price you should pay to achieve a 13.50% cap rate, you would calculate:

$105,000 / 0.1350 = $777,777.78

If the seller is asking $1,000,000, the actual cap rate would only be 10.50%. To hit your 13.50% target, you would either need to negotiate the price down to roughly $777,800 or find a way to increase the annual NOI to $135,000.

Limitations of Cap Rate

While the 13.50 cap rate calculator is a powerful tool for initial screening, it does not account for mortgage payments (debt service), income taxes, or future capital expenditures. It is a "snapshot" of the property's unleveraged yield at a specific point in time. Smart investors use this calculator alongside Internal Rate of Return (IRR) and Cash-on-Cash Return metrics for a complete financial picture.

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