Everyone’s investing in rental properties today, and for good reason! Take a look at what cap rate for rental property you could expect in 2018.
With the use of Mashvisor’s investment property calculator, we are able to provide you with everything you need to make the right investment decision. Buying an investment property can be as easy as ever when you use the right real estate investment tools. And if you’re reading this blog, then you’re already on the right path to success! Let’s first give you the numbers and then go into a quick analysis of what this means for you, as a real estate investor.
The Cap Rate for Rental Property to Expect in 2018
If you’re asking about the cap rate for rental property in 2018, then you’ve probably already taken a look at Mashvisor’s blogs naming the best cities for rental properties in 2018. If you haven’t already, then we recommend you look over these areas because we’re going to tell you why they were listed based on cap rates.
- The Best Cities to Invest in Rental Properties 2018
- Surprising Best Places to Buy Rental Property in 2018
Okay so, you’ve just learned which cities are obviously and surprisingly the best to invest in rental property. If you have any questions about any other city or neighborhood in the US, click here to get your answers. We’ve chosen the neighborhood with the best cap rate for rental property from the best US cities for rental property.
The Cap Rate for Rental Property in the Best US Cities 2018:
- Baltimore, MD- Old Town: Traditional cap rate: 6.99% Airbnb cap rate: 10.94%
- Baltimore, MD- Heritage Crossing: Traditional cap rate: 6.64% Airbnb cap rate: 7.86%
- Nashville, TN- German Town: Traditional cap rate: 5.21% Airbnb cap rate: 12.01%
- Kansas City, MO- South Hyde Park: Traditional cap rate: 1.29% Airbnb cap rate: 8.22%
- Denver, CO- Union Station: Traditional cap rate: 2.65% Airbnb cap rate: 3.67%
- Tampa, FL- Historic Ybor: Traditional cap rate: 2.65% Airbnb cap rate: 4.47%
- Anaheim, CA- Southwest Anaheim: Traditional cap rate: 1.85% Airbnb cap rate: 6.27%
- Orlando, FL- Millenia: Traditional cap rate: 3.44% Airbnb cap rate: 8.76%
FYI- For those of you specifically interested in purchasing an Airbnb rental property, we recommend the following neighborhoods in Nashville:
- Melrose: Airbnb cap rate: 8.03% Airbnb rental income: $6,783
- Historic Waverly Place: Airbnb cap rate: 7.77% Airbnb rental income: $6,649
- The Gulch: Airbnb cap rate: 7.74% Airbnb rental income: $7,083
As you can clearly see, Nashville’s definitely the place to be looking at right now. It’s currently holding the number one spot when it comes to Airbnb rental property.
To start looking for and analyzing the best investment properties in Nashville, click here.
According to our investment property calculator, the neighborhoods mentioned above are the ones with great return on investment. And isn’t that what any real estate investor wants to hear about their rental properties? How great is having such accurate and timely information? I’d say pretty great. With Mashvisor, your wish is our command. Our cap rate calculator instantly provides you with the capitalization rate for any neighborhood you want to conduct a real estate market analysis on. If you want to take advantage of our awesome real estate investment tools, sign up! To learn about your options for signing up for our services, click here.
How We Do It
So now you know what cap rate for rental property to expect, but what does any of this mean and why is it important? Let’s cover a couple of topics so that you leave this blog with all the information you need. What we need to discuss:
#1. What does cap rate mean, and how to calculate cap rate?
#2. What is a good cap rate?
#3. What is Mashvisor’s role in finding the cap rate for rental property?
What does cap rate mean, and how to calculate cap rate?
The cap rate for rental property is one of the most important metrics when it comes to income-producing properties. It’s the rate of return you can expect on your investment based on how much rental income you expect the property to generate. The cap rate, alongside the cash on cash return, is commonly used when comparing properties in real estate investing. Knowing how to make money with rental property investments means being able to correctly compare cap rates for similar properties. You can do this by conducting a comparative market analysis.
Related: How Mashvisor Jumps into Your Comparative Market Analysis
Calculating cap rate involves two main components- the net operating income (NOI) and the sales price of the property. The net operating income is the rental income minus the operating expenses of the property. If the sales price isn’t available, you can find a similar property and assume the same price. The cap rate calculation could be quite difficult if you’re trying to do it on your own but here’s the basic formula:
Cap Rate Formula= NOI/ SALES PRICE (PROPERTY VALUE)
To learn more about the details of the cap rate formula and to see examples, click here.
What is a good cap rate?
This question doesn’t have a straightforward answer. Probably the most widely asked question is “what is a good cap rate?” The answer is, it depends. It depends on the properties you’re comparing, and more specifically, the cash flow of those properties. And the cash flow depends on other factors like the type of property and the market it’s in. When conducting an investment property analysis, all these aspects are factored in. Real estate investors typically look for a 6-8% cap rate for rental property. The higher the cap rate, the higher the risk premium. Simple accounting states that in an investment, higher risk= higher returns, so it all boils down to what you’re prepared to risk. Again, the numbers all depend on the other factors affecting the property so make sure to conduct a proper analysis.
What is Mashvisor’s role in finding the cap rate for rental property?
Mashvisor provides you with the best rental property calculator in the real estate investing world. It’s up-to-date, accurate, and covers any neighborhood you’re interested in. Our calculator uses predictive analytics, historical data, and market trends to find the best investment opportunities out there. Find useful metrics like cap rate, cash on cash return, and much more. Check out this blog to learn the true value of such data!
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.