what is a good cap rate good
Net operating Income: Your gross rental revenue (the amount you get from rent) less operating expenses (such payroll and repair costs. Here's how to calculate it:
The cap rate is useful when valuing a property for its potential to produce regular, predictable income. Consider a 4-unit apartment that is occupied by tenants who have year-long leases. This would allow you to calculate the cap rates.
Real estate investors usually include an estimate of rent loss between 5-10% in their calculations. Let's say you assumed 90% occupancy as in the previous example.
Net operating Income: Your gross rental revenue (the amount you get from rent) less operating expenses (such payroll and repair costs. Here's how to calculate it:
The cap rate calculation below assumes that you are receiving 100% rent each month. That is, that the property has been occupied 100% for at least 365 days per year. Your tenants must also keep up with rent. It's possible for 100% occupancy to occur in a single-family residence, but not for multi-unit buildings with greater turnover. You should consider a cap rate that is less than 100% when possible. Here's how:
Expect annual operating costs to be $5.800 with $3.800 in property tax and $2,000 in maintenance.
It's important to compare cap rates for similar properties. You can compare the cap rates of different properties in your area to determine which one is the best.
There are many methods to calculate the caprate. We'll only focus on the most commonly used. The base formula is:
