RENTAL REAL ESTATE NOI CALCULATION HOW TO

Although the basic structure of the calculation is straightforward, there are a lot of factors that may affect the cap rate of a property. This calculation will give you a percentage that indicates the annual return on your investment. To calculate the cap rate of a property, you simply divide the NOI by the value of the property. Real estate investors and other players in the real estate sector use the cap rate calculation to estimate the return on investment.

In essence, the cap rate is the net operating income (NOI) of a property in relation to the property’s asset value. What is a cap rate?Ī cap rate is a calculation used to determine the profitability of a real estate investment. Let’s dig a little deeper into cap rates and what they mean for real estate investors like ourselves. If you don’t crunch the numbers and factor in every aspect of the costs and potential gains, you may be setting yourself up for a rude awakening and a potential loss of your money.įor these reasons, it’s essential that you understand the ins and outs of the capitalization rate-or cap rate-of a given property to help you accurately determine its profitability.

RENTAL REAL ESTATE NOI CALCULATION HOW TO

While not super sexy, understanding how to properly assess rental property investments with the right calculations and tools is critical. If your math sucks, then so does your investment. However, while the prospect of earning a profit by renting out property is exciting, the reality of real estate is a lot more complex than one may think.

Investing in rental properties can be an incredibly lucrative endeavor.

Rental real estate noi calculation