Nyc Income Tax Calculator

Commercial Real Estate Cap Rate Calculator

Annual income after all operating expenses but before taxes/interest.

The current market value or the price you are paying for the property.

Calculation Result

---

Understanding Capitalization Rate in Commercial Real Estate

The Capitalization Rate, or "Cap Rate," is one of the most vital metrics in commercial real estate (CRE) investing. It represents the expected annual rate of return on an investment property based on the income the property is expected to generate.

The Cap Rate Formula

The calculation is straightforward but requires accurate data:

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

Key Components Explained

• Net Operating Income (NOI): This is the total annual income generated by the property (rent, parking fees, laundry) minus all necessary operating expenses (property taxes, insurance, maintenance, utilities). It does not include mortgage payments or income taxes.
• Property Value: This is either the current market value of the asset or the purchase price.

Investment Example

Imagine you are looking at an apartment complex with the following financials:

• Gross Rental Income: $120,000 per year
• Operating Expenses: $40,000 per year
• Purchase Price: $1,000,000

First, calculate the NOI: $120,000 – $40,000 = $80,000.
Then, divide the NOI by the Value: $80,000 / $1,000,000 = 0.08.
Result: 8% Cap Rate.

What is a "Good" Cap Rate?

There is no universal "good" cap rate. It depends on several factors:

1. Asset Class: Multi-family, retail, industrial, and office buildings all have different average cap rates.
2. Location: Properties in "Class A" locations (like NYC or San Francisco) often have lower cap rates (3-5%) because they are considered safer investments.
3. Interest Rates: As interest rates rise, investors typically demand higher cap rates to compensate for increased borrowing costs.

function calculateCapRate() { var noi = document.getElementById('cre_noi').value; var val = document.getElementById('cre_value').value; var resultBox = document.getElementById('cre_result_box'); var output = document.getElementById('cre_output'); var interpretation = document.getElementById('cre_interpretation'); var noiNum = parseFloat(noi); var valNum = parseFloat(val); if (isNaN(noiNum) || isNaN(valNum) || valNum <= 0) { alert('Please enter valid positive numbers for both fields.'); return; } var capRate = (noiNum / valNum) * 100; var formattedCap = capRate.toFixed(2); resultBox.style.display = 'block'; output.innerHTML = formattedCap + '%'; var message = ''; if (capRate = 4 && capRate 7 && capRate <= 10) { message = 'This is a higher cap rate, which may indicate higher potential returns but also higher risk or a secondary market location.'; } else { message = 'This is an exceptionally high cap rate. Ensure you verify the NOI and property condition for hidden risks.'; } interpretation.innerHTML = message; }