How to use the commercial cap rate calculator
In the US, a commercial security deposit is normally just one or two months of rent and is refundable, so it barely changes what a building costs. That is why American buyers price retail and office space off the cap rate: net operating income divided by the purchase price. This tool keeps the deposit as a separate, small input and reports the cap rate on the purchase price, not on a deposit-adjusted figure.
Three ratios come out of the same inputs. Gross yield is annual rent divided by the purchase price, before any expenses. The cap rate replaces the numerator with net operating income, which is annual rent minus the operating expenses the owner actually pays. Yield on cash invested keeps that same numerator but divides by purchase price plus acquisition costs minus the deposit you are holding, which is the cash genuinely tied up in the deal.
Everything is unlevered. Mortgage interest, principal repayment, vacancy, tenant improvement allowances and future rent escalations are not part of the math, so use the output to line up comparable properties on equal terms and run financing separately.
Frequently asked questions
Both divide by the purchase price, but the numerator differs. Gross yield uses annual rent before expenses, while the cap rate uses net operating income, which is annual rent minus the annual operating expenses the owner pays.
No. Every figure here is unlevered, so loan interest and principal payments are not included. Vacancy is not modeled either, so treat the result as a full-occupancy, all-cash comparison between properties.
A US security deposit is typically one or two months of rent and is refundable, but the landlord holds it during the lease, so that much less of your own cash is tied up. It is subtracted only from cash invested, never from the purchase price used for the cap rate.