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Cap Rate worksheet

Grade 7 · CCSS 7.RP.A.3

Solve each problem and show your work. Round answers to 2 decimal places where needed.

1.
Problem 1.
- Property value or price: $350,000
- Gross annual rental income: $55,000
- Vacancy and credit loss: 6%
- Annual operating expenses: $12,250
Find: Capitalization rate
Answer
2.
Problem 2.
- Property value or price: $325,000
- Gross annual rental income: $32,000
- Vacancy and credit loss: 5%
- Annual operating expenses: $19,000
Find: Capitalization rate
Answer
3.
Problem 3.
- Property value or price: $450,000
- Gross annual rental income: $42,500
- Vacancy and credit loss: 4%
- Annual operating expenses: $13,200
Find: Capitalization rate
Answer
4.
Problem 4.
- Property value or price: $450,000
- Gross annual rental income: $45,000
- Vacancy and credit loss: 7%
- Annual operating expenses: $18,500
Find: Capitalization rate
Answer
5.
Problem 5.
- Property value or price: $475,000
- Gross annual rental income: $55,000
- Vacancy and credit loss: 6%
- Annual operating expenses: $13,000
Find: Capitalization rate
Answer
6.
Problem 6.
- Property value or price: $440,000
- Gross annual rental income: $56,000
- Vacancy and credit loss: 5%
- Annual operating expenses: $16,000
Find: Capitalization rate
Answer
7.
Problem 7.
- Property value or price: $275,000
- Gross annual rental income: $45,000
- Vacancy and credit loss: 5%
- Annual operating expenses: $18,000
Find: Capitalization rate
Answer
8.
Problem 8.
- Property value or price: $375,000
- Gross annual rental income: $45,000
- Vacancy and credit loss: 6%
- Annual operating expenses: $14,000
Find: Capitalization rate
Answer
9.
Problem 9.
- Property value or price: $500,000
- Gross annual rental income: $47,500
- Vacancy and credit loss: 4%
- Annual operating expenses: $15,750
Find: Capitalization rate
Answer
10.
Problem 10.
- Property value or price: $360,000
- Gross annual rental income: $45,000
- Vacancy and credit loss: 5%
- Annual operating expenses: $16,000
Find: Capitalization rate
Answer

Answer key: Cap Rate worksheet

1. Capitalization rate: 11.27%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$55,000.00 \times 1 - 0.06$ $= $51,700.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $51,700.00 - $12,250.00$ $= $39,450.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$39,450.00}{$350,000.00}$ $= 0.11271429$ $= 11.2714%$
2. Capitalization rate: 3.51%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$32,000.00 \times 1 - 0.05$ $= $30,400.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $30,400.00 - $19,000.00$ $= $11,400.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$11,400.00}{$325,000.00}$ $= 0.03507692$ $= 3.5077%$
3. Capitalization rate: 6.13%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$42,500.00 \times 1 - 0.04$ $= $40,800.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $40,800.00 - $13,200.00$ $= $27,600.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$27,600.00}{$450,000.00}$ $= 0.06133333$ $= 6.1333%$
4. Capitalization rate: 5.19%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$45,000.00 \times 1 - 0.07$ $= $41,850.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $41,850.00 - $18,500.00$ $= $23,350.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$23,350.00}{$450,000.00}$ $= 0.05188889$ $= 5.1889%$
5. Capitalization rate: 8.15%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$55,000.00 \times 1 - 0.06$ $= $51,700.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $51,700.00 - $13,000.00$ $= $38,700.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$38,700.00}{$475,000.00}$ $= 0.08147368$ $= 8.1474%$
6. Capitalization rate: 8.45%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$56,000.00 \times 1 - 0.05$ $= $53,200.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $53,200.00 - $16,000.00$ $= $37,200.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$37,200.00}{$440,000.00}$ $= 0.08454545$ $= 8.4545%$
7. Capitalization rate: 9%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$45,000.00 \times 1 - 0.05$ $= $42,750.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $42,750.00 - $18,000.00$ $= $24,750.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$24,750.00}{$275,000.00}$ $= 0.09$ $= 9%$
8. Capitalization rate: 7.55%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$45,000.00 \times 1 - 0.06$ $= $42,300.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $42,300.00 - $14,000.00$ $= $28,300.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$28,300.00}{$375,000.00}$ $= 0.07546667$ $= 7.5467%$
9. Capitalization rate: 5.97%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$47,500.00 \times 1 - 0.04$ $= $45,600.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $45,600.00 - $15,750.00$ $= $29,850.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$29,850.00}{$500,000.00}$ $= 0.0597$ $= 5.97%$
10. Capitalization rate: 7.43%
1. Start with full-occupancy rent, then take off your vacancy allowance. This is the rent you expect to actually collect
  $$45,000.00 \times 1 - 0.05$ $= $42,750.00$
2. Subtract the yearly running costs. What's left is net operating income (NOI), the profit before loan payments
  $NOI$ $= $42,750.00 - $16,000.00$ $= $26,750.00$
3. Divide that profit by the property's value to see what it earns per dollar of price. As a percent, that's the cap rate
  $\frac{$26,750.00}{$360,000.00}$ $= 0.07430556$ $= 7.4306%$