Capitalisation Rate Solution

STEP 0: Pre-Calculation Summary
Formula Used
Capitalisation Rate = (Net Operating Income/Current Market Value)*100
rcap = (NOI/CMV)*100
This formula uses 3 Variables
Variables Used
Capitalisation Rate - Capitalisation Rate is a measure used to evaluate the potential return on a real estate investment.
Net Operating Income - Net Operating Income is the total revenue generated from a property minus operating expenses but excluding debt service and income taxes.
Current Market Value - Current Market Value refers to the estimated worth of an asset or property based on its perceived value in the current market conditions.
STEP 1: Convert Input(s) to Base Unit
Net Operating Income: 59500 --> No Conversion Required
Current Market Value: 460000 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
rcap = (NOI/CMV)*100 --> (59500/460000)*100
Evaluating ... ...
rcap = 12.9347826086957
STEP 3: Convert Result to Output's Unit
12.9347826086957 --> No Conversion Required
FINAL ANSWER
12.9347826086957 12.93478 <-- Capitalisation Rate
(Calculation completed in 00.004 seconds)

Credits

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Created by Keerthika Bathula
Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad
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Verified by Aashna
IGNOU (IGNOU), India
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Capitalisation Rate Formula

​LaTeX ​Go
Capitalisation Rate = (Net Operating Income/Current Market Value)*100
rcap = (NOI/CMV)*100

What is Capitalisation Rate ?

The capitalization rate, commonly known as the cap rate, is a crucial metric in real estate investment that measures the relationship between a property's net operating income (NOI) and its market value or purchase price. It provides investors with a clear understanding of the potential return on investment by indicating the percentage return they can expect to receive annually from the property's income. A higher cap rate signifies a potentially higher return but may also indicate higher risk or lower property value, while a lower cap rate suggests a lower return but may reflect a safer investment or higher property value. Investors use cap rates to evaluate and compare different investment opportunities, considering factors such as property type, location, market trends, and risk tolerance to make informed decisions about real estate investments.




How to Calculate Capitalisation Rate?

Capitalisation Rate calculator uses Capitalisation Rate = (Net Operating Income/Current Market Value)*100 to calculate the Capitalisation Rate, The Capitalisation Rate is a measure used to evaluate the potential return on a real estate investment, calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost. Capitalisation Rate is denoted by rcap symbol.

How to calculate Capitalisation Rate using this online calculator? To use this online calculator for Capitalisation Rate, enter Net Operating Income (NOI) & Current Market Value (CMV) and hit the calculate button. Here is how the Capitalisation Rate calculation can be explained with given input values -> 12.93478 = (59500/460000)*100.

FAQ

What is Capitalisation Rate?
The Capitalisation Rate is a measure used to evaluate the potential return on a real estate investment, calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost and is represented as rcap = (NOI/CMV)*100 or Capitalisation Rate = (Net Operating Income/Current Market Value)*100. Net Operating Income is the total revenue generated from a property minus operating expenses but excluding debt service and income taxes & Current Market Value refers to the estimated worth of an asset or property based on its perceived value in the current market conditions.
How to calculate Capitalisation Rate?
The Capitalisation Rate is a measure used to evaluate the potential return on a real estate investment, calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost is calculated using Capitalisation Rate = (Net Operating Income/Current Market Value)*100. To calculate Capitalisation Rate, you need Net Operating Income (NOI) & Current Market Value (CMV). With our tool, you need to enter the respective value for Net Operating Income & Current Market Value and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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