How do you calculate NOI and Cap Rate? *Fun Exercise*

[Matt M Antonio]

I been seeing a lot of articles/YT Vids with different ways they calculate their net operating income and capitalization rate. I will give a screenshot with numbers below and see how your conclusion varies. 

Two questions:
1. What is your NOI? How did you calculate it?
2. What's is your Cap Rate? How did you calculate it?

Purchasing Price of $280,000

[Jeff Copeland]

Debt service is not an operating expense, so those should not be used at all when calculating cap rate. 

$2600 x 12 = $31,200 Potential Gross Income

Less Vacancy/Collection Losses of 5% = $29,640 Effective Gross Income

$1250/mo = $15000/yr in Operating Expenses

$29640 EGI -$15,000 OE = $14,640 Net Operating Income

$14640 NOI divided by $280k purchase price = 5.22% Cap Rate

Put another way, if you invest $280k in this property, you will see a 5.22% annual return. $280k x 5.22% = $14616 

(the other $24 is just a rounding error from not carrying out the decimals)

There is literally no other correct way to calculate cap rate.

https://www.biggerpockets.com/...