CAP rate KPI example.
This example explains CAP rate. Indevest reviews CAP rate inside one analysis workflow alongside financing, tax, cash-flow, threshold, and comparison context.
Educational KPI example
This example explains a KPI formula. Indevest brings KPI formulas together inside one opportunity analysis workflow.
| Metric | Formula | What it means |
|---|---|---|
| CAP rate | Annual NOI / purchase price | Income yield before financing. |
| Annual NOI | Annual gross income - annual operating expenses | Income before debt service and taxes. |
When CAP rate can mislead
CAP rate can look attractive while DSCR, monthly cash flow, or cash-on-cash return fails after financing. Use CAP rate with debt and cash-flow metrics.
Example scenario
A property with $120,000 NOI and a $1,500,000 purchase price has an 8.0% CAP rate before financing. The same deal can still fail if debt service leaves too little monthly cash flow.
Screen your next investment before deeper diligence.
Use Indevest to review cash flow, CAP rate, DSCR, cash-on-cash return, financing, taxes, assumptions, other KPIs and flags in one analysis.