What on earth is this "cap rate" you keep talking about?


What on earth is this "cap rate" you keep talking about?
By Scott Rogers • May 23, 2008
No --- that's not a cap rate!! Simply put, a "cap rate" is a measure of how quickly your investment is being returned to you. By your "investment" I mean the value of property that you have purchased. by "returned to you" I mean the amount of money that a property generates in a year. The cap rate formula is . . . Net Operating Income / Purchase Price So if you buy a property for $160k, rent it for $975 per month, and have $1,500 of annual expenses, you have a cap rate of 6.375%. ( ( 975 * 12 ) - 1500 ) / 160,000 = 6.375% Care to know more? Read these . . . What Is A "Cap Rate"? Harrisonburg Single-Property Cap Rates Harrisonburg Multi-Family Cap Rates Would you like help calculating the cap rate on a property you own, or are considering purchasing? Call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com). Receive Updates by Email Recent Articles: Is There A Price You WOULD Pay For This House? There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 24, 2024 (unless otherwise noted).
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