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$105,000
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2207 S Ocean Blvd #617, MYRTLE BEACH, SC 29577
MLS#: 2626706
Last updated: November 2026
A cap rate, or capitalization rate, is a property's net operating income divided by its price or value. It shows the yearly return you'd earn if you paid cash, before financing. Investors use it to compare properties quickly, but it ignores debt, future rent changes and major repairs, so it's a starting point, not a decision.
If you're looking at an income property on the Grand Strand, the cap rate is often the first number you'll see. Here's what it means and how to use it.
This guide is part of our guide to buying or leasing commercial property in Myrtle Beach.
In this guide:
- How do you calculate a cap rate?
- What does a cap rate tell you?
- Why should you check the seller's numbers?
- What doesn't a cap rate show?
- How do lease terms affect the cap rate?
- How do investors use cap rates in practice?
- How does a cap rate relate to your financing?
- What terms should you know?
- Where do you find cap rates for the Grand Strand?
- What else do people ask about this?
- Ready to talk about commercial space on the Grand Strand?
How do you calculate a cap rate?
Cap rate equals net operating income divided by price. Net operating income (NOI) is the property's yearly income minus operating expenses, before loan payments and income taxes.
For example, a property with $100,000 of NOI and a $1,250,000 price has a cap rate of 8 percent. That's a simple math example, not a market figure for Myrtle Beach.
Operating expenses usually include taxes, insurance, maintenance, management, utilities the owner pays and a reserve for vacancy. Mortgage payments and depreciation are not part of NOI.
What does a cap rate tell you?
It's a snapshot of return relative to price. A higher cap rate means more income per dollar paid, which can signal more risk, a weaker location or a property that needs work. A lower cap rate usually means buyers are paying more for steadier or more desirable income.
Cap rates make it easy to compare properties of different sizes, and to see how a price compares with what buyers have paid for similar properties.
Why should you check the seller's numbers?
A cap rate is only as good as the NOI behind it. Sellers sometimes quote a cap rate based on projected rents, leave out expenses like management or reserves, or ignore vacancy.
Ask for the rent roll, the leases and at least a couple of years of actual operating statements. Rebuild the NOI yourself. On the coast, check the insurance cost closely, since it can change what a property really earns. See due diligence.
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What doesn't a cap rate show?
A cap rate leaves out a lot.
- Financing, which changes your actual cash return.
- When leases expire and whether tenants will renew.
- Upcoming capital needs, like a roof or parking lot.
- Future rent growth or decline.
- Tax effects, including depreciation and a possible 1031 exchange.
Investors often look at cash-on-cash return and internal rate of return alongside the cap rate.
How do lease terms affect the cap rate?
Who pays expenses changes the NOI. A property with triple net leases may have a more predictable NOI because tenants carry most operating costs. A property with gross leases leaves more cost risk with the owner.
Read the leases, not just the summary. See NNN vs gross vs modified gross leases.
How do investors use cap rates in practice?
Investors use cap rates three main ways. First, to compare properties quickly. Second, to estimate value: if similar properties have sold at a certain cap rate, dividing a property's NOI by that rate gives a rough value. Third, to think about exit: what the property might sell for later, based on future NOI and an assumed cap rate.
Each use depends on good data. A small change in the cap rate assumption can change the estimated value a lot, so use comparables for the same property type and similar lease terms.
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How does a cap rate relate to your financing?
If the cap rate is below your loan's cost, leverage can hurt your returns. When the property's yield is lower than the interest rate on your debt, borrowing more can reduce your cash return. When it's higher, leverage can help. That's why investors look at cash-on-cash return and debt service coverage alongside the cap rate. See commercial financing.
What terms should you know?
- Net operating income (NOI): Income minus operating expenses, before debt payments, depreciation and income taxes.
- Rent roll: A list of tenants, rents, lease dates and terms for an income property.
- Cash-on-cash return: Your yearly pre-tax cash flow after debt payments, divided by the cash you invested.
Where do you find cap rates for the Grand Strand?
We don't publish a typical local cap rate here because we don't have a sourced one to share. Cap rates vary by property type, tenant quality, lease length and timing. An appraiser, lender or commercial agent can pull comparable sales for the property type you're considering.
If you're selling another investment property to buy here, read how a 1031 exchange works.
Related guides:
- How Does a 1031 Exchange Work When Buying Commercial Property in South Carolina?
- How Is Financing Commercial Property Different From a Home Loan (SBA 504 and 7(a))?
- What Is Due Diligence on a Commercial Property, and How Long Should I Ask For in Myrtle Beach?
- How Do I Buy or Lease Commercial Property in Myrtle Beach?
What else do people ask about this?
What is a good cap rate?
There's no single answer. It depends on property type, location, tenants and risk. Compare against recent sales of similar properties.
Does the cap rate include my mortgage?
No. Cap rate is based on net operating income before loan payments.
What is net operating income?
Yearly income from the property minus operating expenses, before debt payments, depreciation and income taxes.
Why would a higher cap rate be risky?
A higher cap rate can reflect more risk, such as short leases, weaker tenants or a property that needs work.
Should I trust the cap rate in a listing?
Treat it as a starting point. Rebuild the NOI from actual operating statements and leases.
This article is general information, not legal, tax or financial advice. Rules and requirements change. Talk to a South Carolina attorney, CPA or lender about your situation, and confirm current requirements with the agency involved.
Ready to talk about commercial space on the Grand Strand?
Whether you are leasing your first space, buying a building for your business or adding an investment property, a short call with our team can help you sort out the options and the next steps. No pressure, and no commitment.
