Duplex & Multi-Family Homes Blog | Investment Property News - Blog Archive: February, 2023

Calculating Cap Rate  

The Cap Rate is a quick way to check the financial outlook of a multifamily investment property. So how do you calculate the cap rate on an investment property? The basic calculation is pretty simple:

Cap Rate = Net Income / Property Value

Cap Rate Example
Let's do an example of calculating the Cap Rate. You’ll need these numbers:

  1. Property Value. Not just the asking price, but what the property is actually worth. Your Realtor can help you determine this number by pulling comps for similar multifamily properties that have sold in the area. For our example let’s say that you’ve found a duplex that is worth $300,000.
  2. Gross Income. This is the gross rent that the owner would receive. For our example we’re going to say that the property is rented…

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