Calculate real estate investment metrics like ROI and cap rate. Part of the DevTools Surf developer suite. Browse more tools in the Real Estate & Home collection.
Use Cases
Calculate cap rate and NOI for a potential rental property purchase to compare against market benchmarks.
Model cash-on-cash return under different financing scenarios (20% vs. 25% vs. 30% down).
Estimate break-even occupancy rate to determine the margin of safety in a rental investment.
Compare two properties across different markets by normalizing ROI metrics.
Tips
Use cap rate for comparing properties independent of financing; use cash-on-cash return when evaluating leveraged purchases — they measure different things.
Factor vacancy rate into NOI calculations: assume 5–10% vacancy even for fully occupied properties to model realistic long-run performance.
Calculate GRM (gross rent multiplier) as a quick screening ratio before doing a full DCF — properties with GRM above 15 in most markets are overpriced relative to rent.
Fun Facts
The cap rate (capitalization rate), the primary metric for commercial real estate valuation, was popularized in academic literature in the 1950s and adopted by appraisers in the 1960s.
Real estate has generated an average annual total return of approximately 9.5% in the US since 1970, compared to 10.2% for the S&P 500 over the same period, per NCREIF data.
The 1% rule (monthly rent should equal at least 1% of purchase price) became popular in real estate investing circles in the early 2000s, though rising prices have made it difficult to achieve in most US markets since 2015.
FAQ
What is cap rate and what's a good number?
Cap rate = NOI / property value. It represents yield ignoring financing. In major US cities, 4–5% is typical for multifamily; 6–8% is common in secondary markets. Higher cap rates mean more income relative to price but often more risk.
Cash-on-cash return vs. cap rate — which matters more?
Cap rate is a property-level metric useful for comparing assets and markets. Cash-on-cash measures your actual yield on invested equity including the effect of leverage. Both matter; they answer different questions.
