Quick cap rate
Screen a listing in thirty seconds.
Cap rate ignores financing so you can compare properties on their operating performance alone.
The property
What not to include
Leave out mortgage payments, income tax and one-time costs like closing fees or a new roof. Cap rate measures what the property earns on its own, so two buyers with different loans get the same number.
Estimated cap rate
6.91%
A solid yield that many investors consider healthy. Check the condition and the neighborhood.
Your next step
Shown when the yield clears a common 6% screening mark.
What a cap rate tells you
Cap rate is net operating income divided by purchase price. A 7% cap rate means the property’s operations produce 7% of its price each year, before the mortgage and income taxes.
It is best used to compare similar properties in the same market. A much higher cap rate than the neighbors’ is a prompt to ask why: the rent may be overstated, the expenses understated, or the property may need work. When you are ready to bring in financing, move to the rental analyzer for cash flow and cash-on-cash return.