Evelyn  Hubbard  Realty  Group  Inc. l CalDRE
#01971749 l NMLS #1418728
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Example: You rent out a small, three-bedroom house for $3,000
per month or
$36,000 per year.

You anticipate annual expenses as follows:
  • vacancy rate of 5% = $1,800
  • real estate taxes = $5,800
  • maintenance and other expenses = $3,000

Total annual expenses = $10,600

Total annual net income = $25,400
($36,000 - $10,600)

In the example above, the
asking price for the property is

The Capitalization ("CAP") Rate calculation then is:
$25,400/$500,000 = 5.08% ≈ 5.1%
(annual net income divided by sales price)

This three-bedroom property therefore yields a “cap rate” return
of 5.1% (unless you are fortunate to purchase property for a
price lower than $500,000, then cap rate is higher). CA Cap
Rates average 4
-10% depending on demands in the areas.

Check with us or your local Realtor® for more Information.