Cap Rate Calculator — Real Estate Yield Calculator
Enhances the profitability-analyst agent's investment return analysis capabilities.
Core Yield Metrics
Cap Rate (Capitalization Rate)
Cap Rate = NOI / Purchase Price x 100
NOI (Net Operating Income) = Total Rental Income - Operating Expenses
Operating Expenses = Management Fees + Maintenance + Insurance + Taxes + Vacancy Loss
Example:
Purchase Price: $1,000,000
Annual Rental Income: $72,000 ($6,000/month)
Operating Expenses: $12,000
NOI: $60,000
Cap Rate: 60,000 / 1,000,000 x 100 = 6.0%
Cap Rate Benchmarks
| Property Type |
Cap Rate Range |
Risk |
| Office (Prime) |
3.5-4.5% |
Low |
| Office (Other) |
4.5-6.0% |
Medium |
| Retail (Commercial) |
4.0-7.0% |
Medium |
| Residential (Apartment) |
2.0-4.0% |
Low |
| Logistics/Warehouse |
5.0-7.0% |
Medium |
| Studio/Serviced Apartment |
3.5-5.5% |
Medium |
Rental Yield (Gross Yield vs Net Yield)
Gross Yield = Annual Gross Rental Income / Purchase Price x 100
Net Yield = NOI / Purchase Price x 100
Typically Net Yield = Gross Yield x 0.7-0.85
(Operating expense ratio 15-30%)
Cash Flow Analysis
Leveraged Return
Cash-on-Cash Return = Pre-Tax Cash Flow / Equity x 100
Pre-Tax Cash Flow = NOI - Annual Debt Service
Example:
Purchase Price: $1,000,000 (LTV 60% = Loan $600,000)
Equity: $400,000
NOI: $60,000
Annual Debt Service: $36,000 (3.5%, 30 years)
Pre-Tax Cash Flow: $24,000
Cash-on-Cash: 24,000 / 400,000 x 100 = 6.0%
Monthly Cash Flow Template
| Item |
Monthly |
Annual |
| (+) Rental Income |
$6,000 |
$72,000 |
| (-) Vacancy Loss (5%) |
-$300 |
-$3,600 |
| (-) Management Fees |
-$500 |
-$6,000 |
| (-) Maintenance & Repairs |
-$200 |
-$2,400 |
| (-) Insurance |
-$50 |
-$600 |
| (-) Property Tax |
-$150 |
-$1,800 |
| (=) NOI |
$4,800 |
$57,600 |
| (-) Debt Service |
-$3,000 |
-$36,000 |
| (=) Pre-Tax Cash Flow |
$1,800 |
$21,600 |
DCF (Discounted Cash Flow)
Property Value = Sum of [NOI_t / (1+r)^t] + Terminal Value / (1+r)^n
Terminal Value = NOI_{n+1} / Exit Cap Rate
Variables:
r: Discount rate (typically 8-12%)
n: Holding period (typically 5-10 years)
Exit Cap Rate: Cap Rate at sale (typically +0.5% premium)
NOI Growth Rate Assumptions:
Conservative: 1-2% per year (inflation rate)
Baseline: 2-3% per year (rent escalation)
Optimistic: 3-5% per year (area growth)
Investment Scenario Analysis
Scenario Template
| Item |
Conservative |
Baseline |
Optimistic |
| Purchase Price |
$1,000,000 |
$1,000,000 |
$1,000,000 |
| Initial Rent |
$5,500/month |
$6,000/month |
$6,500/month |
| Vacancy Rate |
10% |
5% |
3% |
| Rent Escalation |
1%/year |
3%/year |
5%/year |
| Sale Price After 5 Years |
$1,050,000 |
$1,200,000 |
$1,400,000 |
| 5-Year Total Return |
18% |
42% |
68% |
| Annualized Return |
3.4% |
7.3% |
10.9% |
Investment Decision Criteria
| Metric |
Attractive |
Hold |
Reject |
| Cap Rate |
> 5% |
3-5% |
< 3% |
| Cash-on-Cash |
> 8% |
5-8% |
< 5% |
| IRR |
> 12% |
8-12% |
< 8% |
| Payback |
< 8 years |
8-12 years |
> 12 years |
| DSCR |
> 1.3 |
1.1-1.3 |
< 1.1 |
Quality Checklist
| Item |
Criteria |
| Yield Metrics |
Cap Rate + Cash-on-Cash + IRR |
| NOI Accuracy |
Itemized operating expense calculation |
| Leverage |
Loan terms reflected |
| Scenarios |
Conservative/Baseline/Optimistic (3 scenarios) |
| Benchmarking |
Comparable property comparison |
| Exit Strategy |
Exit Cap Rate assumption |
1---2name: cap-rate-calculator3description: Real estate yield calculator. Reference formulas and models used by the profitability-analyst agent for quantitative investment return analysis. Use for requests involving 'Cap Rate', 'yield analysis', 'DCF', or 'cash flow analysis'. Tax advisory and loan underwriting are out of scope.4---56# Cap Rate Calculator — Real Estate Yield Calculator78Enhances the profitability-analyst agent's investment return analysis capabilities.910## Core Yield Metrics1112### Cap Rate (Capitalization Rate)1314```15Cap Rate = NOI / Purchase Price x 1001617NOI (Net Operating Income) = Total Rental Income - Operating Expenses18Operating Expenses = Management Fees + Maintenance + Insurance + Taxes + Vacancy Loss1920Example:21 Purchase Price: $1,000,00022 Annual Rental Income: $72,000 ($6,000/month)23 Operating Expenses: $12,00024 NOI: $60,00025 Cap Rate: 60,000 / 1,000,000 x 100 = 6.0%26```2728### Cap Rate Benchmarks2930| Property Type | Cap Rate Range | Risk |31|--------------|---------------|------|32| Office (Prime) | 3.5-4.5% | Low |33| Office (Other) | 4.5-6.0% | Medium |34| Retail (Commercial) | 4.0-7.0% | Medium |35| Residential (Apartment) | 2.0-4.0% | Low |36| Logistics/Warehouse | 5.0-7.0% | Medium |37| Studio/Serviced Apartment | 3.5-5.5% | Medium |3839### Rental Yield (Gross Yield vs Net Yield)4041```42Gross Yield = Annual Gross Rental Income / Purchase Price x 10043Net Yield = NOI / Purchase Price x 1004445Typically Net Yield = Gross Yield x 0.7-0.8546(Operating expense ratio 15-30%)47```4849## Cash Flow Analysis5051### Leveraged Return5253```54Cash-on-Cash Return = Pre-Tax Cash Flow / Equity x 1005556Pre-Tax Cash Flow = NOI - Annual Debt Service5758Example:59 Purchase Price: $1,000,000 (LTV 60% = Loan $600,000)60 Equity: $400,00061 NOI: $60,00062 Annual Debt Service: $36,000 (3.5%, 30 years)63 Pre-Tax Cash Flow: $24,00064 Cash-on-Cash: 24,000 / 400,000 x 100 = 6.0%65```6667### Monthly Cash Flow Template6869| Item | Monthly | Annual |70|------|---------|--------|71| (+) Rental Income | $6,000 | $72,000 |72| (-) Vacancy Loss (5%) | -$300 | -$3,600 |73| (-) Management Fees | -$500 | -$6,000 |74| (-) Maintenance & Repairs | -$200 | -$2,400 |75| (-) Insurance | -$50 | -$600 |76| (-) Property Tax | -$150 | -$1,800 |77| **(=) NOI** | **$4,800** | **$57,600** |78| (-) Debt Service | -$3,000 | -$36,000 |79| **(=) Pre-Tax Cash Flow** | **$1,800** | **$21,600** |8081## DCF (Discounted Cash Flow)8283```84Property Value = Sum of [NOI_t / (1+r)^t] + Terminal Value / (1+r)^n8586Terminal Value = NOI_{n+1} / Exit Cap Rate8788Variables:89 r: Discount rate (typically 8-12%)90 n: Holding period (typically 5-10 years)91 Exit Cap Rate: Cap Rate at sale (typically +0.5% premium)9293NOI Growth Rate Assumptions:94 Conservative: 1-2% per year (inflation rate)95 Baseline: 2-3% per year (rent escalation)96 Optimistic: 3-5% per year (area growth)97```9899## Investment Scenario Analysis100101### Scenario Template102103| Item | Conservative | Baseline | Optimistic |104|------|-------------|----------|------------|105| Purchase Price | $1,000,000 | $1,000,000 | $1,000,000 |106| Initial Rent | $5,500/month | $6,000/month | $6,500/month |107| Vacancy Rate | 10% | 5% | 3% |108| Rent Escalation | 1%/year | 3%/year | 5%/year |109| Sale Price After 5 Years | $1,050,000 | $1,200,000 | $1,400,000 |110| **5-Year Total Return** | **18%** | **42%** | **68%** |111| **Annualized Return** | **3.4%** | **7.3%** | **10.9%** |112113## Investment Decision Criteria114115| Metric | Attractive | Hold | Reject |116|--------|-----------|------|--------|117| Cap Rate | > 5% | 3-5% | < 3% |118| Cash-on-Cash | > 8% | 5-8% | < 5% |119| IRR | > 12% | 8-12% | < 8% |120| Payback | < 8 years | 8-12 years | > 12 years |121| DSCR | > 1.3 | 1.1-1.3 | < 1.1 |122123## Quality Checklist124125| Item | Criteria |126|------|----------|127| Yield Metrics | Cap Rate + Cash-on-Cash + IRR |128| NOI Accuracy | Itemized operating expense calculation |129| Leverage | Loan terms reflected |130| Scenarios | Conservative/Baseline/Optimistic (3 scenarios) |131| Benchmarking | Comparable property comparison |132| Exit Strategy | Exit Cap Rate assumption |
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