Mashvisor Tools Where Can You Find the Best Cap Rate Calculator for Your Real Estate Investments? by Nadia Abulatif January 13, 2018February 12, 2019 by Nadia Abulatif January 13, 2018February 12, 2019 As a real estate investor, you must know that there are must-have tools in order for your business to succeed. One of these tools is the cap rate calculator. Now, you are wondering where to find the best calculator for your real estate investments. Keep reading! In order for you to understand what a cap rate calculator is, it is important to know what cap rate means. So, first, we are going to define cap rate, then tell you why you need it, and then get to the most important part: Where to find the best cap rate calculator for your real estate investments. Related: Cap Rate Property Valuation: Real Estate Investing What is cap rate in the first place? Real estate investors use the term cap rate to refer to the capitalization rate. This real estate metric is one of the most important metrics to estimate the return on a certain investment property. It is mostly used for commercial real estate properties. However, it can be used for residential real estate properties as well. Basically, a cap rate estimates the return on all the money invested in the property. For this, there is a very simple formula that you can use, as follows: Cap rate = Net operating income/Value of the property Why do real estate investors use cap rate? Notice from before, unlike other metrics, such as the cash on cash return, that the cap rate calculates all the money involved regardless of the financing strategy you use to finance your investment property. Meanwhile, the cash on cash return only calculates the return on the actual dollars put into the investment. More precisely, it takes into account the financing strategy you used to fund your property. This shapes the major difference between the two metrics: The money involved in the investment property. Cap rate is a part of traditional and predictive analytics at the same time. Traditional analytics take into account the current state of the real estate market. Therefore, if you are looking for the current state of a specific neighborhood, you might as well calculate the cap rate for properties within that area. On the other hand, predictive analytics are those that look into the future of the real estate market. It can be used to determine whether the market is going up or downhill. For this, you will also need to calculate the cap rate in order to estimate the future of a certain investment property in a certain market. Related: Comparative Market Analysis: Real Estate Investing Now, what is a cap rate calculator? A cap rate calculator is an online real estate analytics tool that is a form of an investment property calculator. It essentially applies all the figures you provide to the cap rate formula we have mentioned before and does the calculation for you. You can use it to figure out not only the cap rate, but also the other variables in the formula. Let us say that you know what the cap rate for an investment property is, and you have an estimated figure of its NOI. However, you do not know how much the market value of the property is. So, at this point, the only thing you need to do is to insert the variables you have got and let the calculator do the rest for you. You will have an estimated market value of your property. As an investor, why do you need a cap rate calculator? Examining your options: The cap rate calculator is an important tool to examine your investment property options. When buying an investment property, you can’t just buy the first one you get your eyes on. You must understand that before you decide on which property to buy, you will look at hundreds of options. In fact, it will get overwhelming at some point. Therefore, in order to make the process easier, you should use a cap rate calculator. It will help you eliminate the investment properties with low investment potential right away. Performing real estate investment property analysis: When it comes to making money in real estate, a cap rate calculator is a must. This tool will help you spot the positive cash flow properties right away. It will save you the pain of looking at properties that are not worthwhile. Not only that, but you will also be able to grow your real estate investment portfolio in no time. This tool is the ultimate way to purchase and maintain positive cash flow properties. Wait, there is more! This tool will help you when you decide to sell your property as well since you will need to use it when evaluating the price of your property at the time you decide to sell it. Related: Investment Analysis: Real Estate Investing Determining your rent: Real estate investors also use the cap rate calculator for their rental properties. They use it to determine how much they should charge for rent. Simply, they calculate the NOI, add all the property expenses, and then divide it by 12. The number you get is the estimated monthly rent you should be charging your tenants. What is a good cap rate for an investment property? It is known amongst real estate investors that a cap rate of 8%-12% is good. However, it is hard to determine for sure. The cap rate calculator variables take into consideration the location as well as other factors. These factors can be a determining point for the potential of an investment property. Therefore, you will have to take into consideration the real estate market analysis as well as traditional and predictive analytics for that property. Where to find the best cap rate calculator? This is the whole point of this blog. Where can you find the best cap rate calculator for your real estate investments? The answer is, obviously, Mashvisor! You can find the cap rate calculator as a part of our investment property calculator. In addition to calculating the cap rate, it will help you perform the most accurate real estate market analysis as well as investment property analysis. Our advanced tools will save you the time, efforts, and money required in your real estate investing business. Therefore, what you need to be doing now is checking out Mashvisor’s investment property calculator! Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL Cap RateInvestment CalculatorInvestment Property AnalysisRental Rate 0 FacebookTwitterGoogle +PinterestLinkedin Nadia Abulatif Nadia Abulatif is an experienced Content Writer at Mashvisor. She was a trainee lawyer before switching to writing about real estate. 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