What's a cap rate? A plain-talk guide for Central PA investors
A cap rate (short for capitalization rate) is a quick way to compare income properties. It's the building's yearly income after expenses, divided by the price.
The math, with made-up numbers
Say a fourplex brings in $48,000 a year in rent. Taxes, insurance, repairs, water and sewer and a little set aside for empty months add up to $18,000. That leaves $30,000. That number is called net operating income (NOI). If the price is $400,000, the cap rate is $30,000 ÷ $400,000 = 7.5%.
What it doesn't tell you
- It leaves out your loan payment, so it isn't your actual return.
- It's only as good as the expense numbers. Ask for real bills, not estimates.
- A building with deferred repairs can look great on paper.
Use cap rate to compare buildings, then dig into the details.
Watch
Central PA Multifamily Prices: Median vs. Average (Fall 2026 Update, 131 Closed Transactions)
General info only, not tax, legal or investment advice. Check with your CPA and attorney.
Written by Josh Schoenly, REALTOR® with eXp Realty, LLC (PA License RS307071). More about Josh. This is general info, not tax, legal or investment advice. Check with your CPA and attorney.
