Frequently asked questions
What is a good cap rate?
There is no universal answer — cap rate is a market price, not a quality score. A 4.5% cap in a supply-constrained coastal market and an 8.5% cap in a tertiary market can carry identical risk-adjusted returns. Compare a property only against recent sales of similar assets in the same submarket.
Should I use actual or pro forma numbers?
Underwrite on trailing twelve-month actuals, then model the pro forma separately as an upside case. Sellers quote pro forma cap rates because they assume every unit is full and every rent increase lands.
Why does cap rate ignore financing?
Because it measures the property, not the deal. Two buyers with different loans should agree on cap rate and disagree on cash-on-cash return.
How to use this calculator well
Every model is a set of assumptions wearing a number. The value of a calculator is not the figure it produces but the sensitivity it reveals — change one input at a time and watch which variable actually moves your outcome. That tells you where to spend your diligence.
Defaults here are illustrative starting points, not market data. Replace every one of them with figures specific to your property, your county, and your quotes. When a result depends heavily on an assumption you cannot verify, that is a signal about the deal, not about the calculator.