Quick question on understanding CAP Rate


When arriving at the “Net Income” portion (top number of fraction) of the cap rate, is the cost of the monthly loan payment figured in to this number?

Yearly Income = $100,000

  • Cost to operate = $40,000 (summarized for utilities, upkeep, salary, taxes, etc)
    = $60,000
  • $30,000 Loan Repayment at $2500 / Month
    = $30,000 NET

So, for CAP Rate top number, do I use $60K or $30K?


Cap rates are calculated on Net Opetating Inome (NOI) which is all income less operating expenses such as utilities management etc.
Debt service is not included in NOI