Money-weighted Rate of Return Calculator Ba Ii Plus

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.example-box {
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padding: 15px;
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Commercial Real Estate Cap Rate Calculator

Calculate the Capitalization Rate and Net Operating Income (NOI) for investment properties.

What is a Cap Rate in Commercial Real Estate?

The Capitalization Rate, or “Cap Rate,” is one of the most fundamental metrics used in commercial real estate to evaluate the profitability and return potential of an investment property. It represents the yield of a property over a one-year time horizon assuming the property was purchased in cash.

The Cap Rate Formula

To determine the Cap Rate, you must first calculate the Net Operating Income (NOI). The formula is as follows:

Cap Rate = (Net Operating Income / Current Market Value) x 100

Realistic Example:
Imagine you are looking at a retail strip mall priced at $2,500,000.

• Annual Gross Rent: $300,000
• Annual Expenses (Taxes, Insurance, Maintenance): $90,000
• Net Operating Income (NOI): $210,000
• Cap Rate: ($210,000 / $2,500,000) = 8.4%

Why Cap Rates Matter for Investors

Cap rates allow investors to compare different real estate opportunities quickly. A higher cap rate generally indicates a higher potential return but often comes with higher risk (such as older buildings or less stable tenants). Conversely, a lower cap rate typically indicates a “safer” investment in a prime location with high-demand tenants.

Key Factors Influencing Cap Rates

• Location: Properties in Tier 1 cities (NYC, London, Tokyo) typically have lower cap rates due to stability.
• Asset Class: Multi-family, industrial, retail, and office buildings all carry different average cap rates.
• Interest Rates: As federal interest rates rise, cap rates generally trend upward to remain competitive with “risk-free” investments like Treasury bonds.
• Tenant Credit: A building leased to a Fortune 500 company will have a lower cap rate than one leased to a local startup.

function calculateCapRate() {
var price = parseFloat(document.getElementById(‘propertyValue’).value);
var gross = parseFloat(document.getElementById(‘grossIncome’).value);
var expenses = parseFloat(document.getElementById(‘operatingExpenses’).value);
if (isNaN(price) || isNaN(gross) || isNaN(expenses) || price <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var noi = gross – expenses;
var capRate = (noi / price) * 100;
var monthly = noi / 12;
document.getElementById('resNOI').innerText = "$" + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
document.getElementById('resMonthly').innerText = "$" + monthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resultBox').style.display = 'block';
}