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Real Estate Capitalization Rate (CAP Rate) Calculator with Sensitivity Matrix
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How to Use This CAP Rate Calculator: Play the Video ↓
CAP Rate Calculator with Sensitivity Matrix Excel Template
Download here the ultimate CAP RATE CALCULATOR with sensitivity matrix, part of 35+ simple templates for real estate agents — Excel and Google Sheets. FREE!
Cap rate (or Capitalization rate) is the rate at which you discount future income to determine its present value. In practice, the cap rate is a widely used ratio in commercial real estate analysis to express the relationship between a property’s value and its net operating income (NOI) for the current or coming year. To make it easy to quickly calculate the cap rate, download this simple workbook for Excel, Google Sheets, and LibreOffice Calc.
The numbers inserted in the spreadsheet are theoretical examples and are provided only to show how to enter data. They should not be used as a guide for what numbers to include in your own calculations.
Some basic instructions for doing the analysis are included below, but you may double-check calculations and you may consult your team (accountant, tax advisor, property manager, legal rep, etc.) before using the file, which is intended for informational and educational purposes only.
How to Use this Spreadsheet
Sensitivity analysis in Excel lets us examine the uncertainty in the output of the model with the changes in the input variables. In real estate, a sensitivity analysis includes several factors that might impact the property’s returns and measures how a change in each factor would influence profits.
Since real estate factors like the selling price are beyond the investor’s control, such an analysis is particularly useful in allowing realtors to figure out the worst/best case scenario. For example, a sensitivity analysis will help you answer questions like: ‘If I want to buy the property for not more than $X, what would the corresponding cap rate and NOI be?’
Running a sensitivity analysis can be quite complicated, which is why you’ll do one through Excel.
Sensitivity Analysis in Excel using Tipsographic file is very straightforward. By and large, here’s the workflow:
- Decide what result do you want to discover from this analysis, cap rate, property value, or NOI.
- Choose variable #1: What variable would you like to test out?
- Choose variable #2: Choose the second variable.
- Open the spreadsheet; in the calculator in the upper part, enter any two variables by editing the cells with the light yellow background. The output, or result of the two variables will populate automatically the tables in the second half.
Free, easy!
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Download CAP Rate Calculator with Sensitivity Matrix for Excel
CAP Rate Calculator: Next Steps
Here are a few links you may want to check out to learn more about cap rate:
- Learn more about real estate investing in this book by Gaylon E. Greer and Phillip T. Kolbe: Investment Analysis for Real Estate Decisions, and in this book by Ken McElroy: The ABCs of Real Estate Investing.
- Learn more about how the capitalization rate (cap rate) is calculated and how it can be used in these articles: How to Figure Cap Rate at wikihow.com and Capitalization Rate at wikipedia.org.
- Check out my free real estate spreadsheets for Excel and Google Sheets.
- Keep up-to-date with new templates for real estate agents and CRM freebies by subscribing to my YouTube Channel.
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