Commercial Cap Rate & NOI Sizer evaluates the capitalization rate (Cap Rate) and annual Net Operating Income (NOI) for commercial office buildings, retail centers, industrial warehouses, and multifamily apartment complexes.

### The Capitalization Rate Formula Real estate investors and commercial appraisers use capitalization rates to compare property yields without distortions from debt financing structures: - **Effective Gross Income (EGI):** $$\text{EGI} = \text{Gross Scheduled Rent} \times \left(1 - \frac{\text{Vacancy \%}}{100}\right)$ - **Net Operating Income (NOI):** $$\text{NOI} = \text{EGI} - \text{Annual Operating Expenses}$ *(Operating expenses include property taxes, building insurance, maintenance, and management fees, excluding mortgage principal and interest).* - **Capitalization Rate:** $$\text{Cap Rate (\%)} = \left(\frac{\text{NOI}}{\text{Purchase Price}}\right) \times 100$

### Worked Numeric Example Consider an investor evaluating an 8-unit multifamily building: - **Purchase Price:** $850,000 - **Gross Scheduled Rent:** $96,000 / year - **Vacancy & Credit Loss:** 5% - **Annual Operating Expenses:** $28,000 / year

**Step-by-Step Calculation:** 1. **Effective Gross Income:** $96,000 \times (1 - 0.05) = $96,000 \times 0.95 = $91,200. 2. **Net Operating Income (NOI):** $91,200 - $28,000 = $63,200 / year ($5,267 / month). 3. **Cap Rate:** ($63,200 / $850,000) \times 100 = 7.435\% \approx 7.44\%$. 4. **Expense Ratio:** ($28,000 / $91,200) \times 100 = 30.7\%$.

### In-Browser Processing Note All NOI and cap rate equations run locally in your web browser. No commercial lease terms, property purchase prices, or operating expense data are transmitted to any server.