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Cap Rate Calculator
Calculate Capitalization Rate (Cap Rate) for any investment property. Compare properties and evaluate performance using this essential real estate metric.
Property Value
$
Annual Income
$
$
Total Annual Income:$24,000
Annual Operating Expenses
Note: Do NOT include mortgage payment - Cap Rate excludes debt service
$
$
$
$
$
$
$
Total Operating Expenses:$7,800
What is Cap Rate?
Capitalization Rate (Cap Rate) is the ratio of a property's Net Operating Income (NOI) to its current market value or purchase price. It's expressed as a percentage and helps investors compare different properties regardless of financing.
Unlike cash-on-cash return, cap rate does NOT include mortgage payments. It measures the property's performance independent of how it's financed, making it ideal for comparing properties.
Cap Rate Ranges by Market
- 10%+: Excellent returns, potentially higher-risk or emerging markets
- 8-10%: Strong returns, good markets
- 6-8%: Average returns, established markets
- 4-6%: Lower returns, premium/low-risk markets
Key Insights
- • Higher cap rate = Higher returns (but often higher risk)
- • Lower cap rate = Lower returns (but often lower risk/premium area)
- • Cap rate excludes mortgage, so it's useful for all-cash comparisons
- • Compare properties in similar markets for best accuracy
Cap Rate Formula
Cap Rate = (NOI ÷ Property Value) × 100