This calculator helps you figure out what the Cap Rate and Cash on Cash Yield is for a new real estate opportunity.
This calculator is built in a spreadsheet so it is easy to update and add your own analysis. It’s meant for both seasoned investors and newcomers.
Key Terms:
- Purchase Price: The purchase price refers to the listed price of the property. For the sake of this spreadsheet, you can also plug in the amount you expect will be required to purchase the property (for example, if you think the list price is too high you can put in a lower amount)
- Mortgage Amount: The mortgage amount represents the total loan principal borrowed to purchase a property. Generally it’s 80% which means you as the buyer have to come up with 20% of the purchase price in cash.
- Loan Interest Rate: The loan interest rate is the percentage of interest that a borrower will pay on the amount borrowed from a lender or bank. This number is critical. If you are pre-approved for a loan, put in that rate or do some research on what the average mortgage interest rate is.
- Amortization Period: The amortization period is the length of time over which a loan will be fully paid off, typically expressed in years. Generally this is 30 years or 15 years.
- Cap Rate (Capitalization Rate): The cap rate is a financial metric used to evaluate the potential return on investment for a real estate property. It is calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost. The cap rate helps investors compare different investment opportunities and assess their profitability.