Cap Rate Calculator
Calculate the capitalization rate for your investment property
Total rent collected per year (before expenses)
Enter property price and rental income to calculate cap rate
Results update automatically as you type
Cap Rate Formula:
Cap Rate = (NOI / Property Price) × 100
Where NOI = Gross Income - Vacancy - Operating Expenses
What is Cap Rate?
The capitalization rate (cap rate) is one of the most important metrics in real estate investing. It represents the rate of return on an investment property based on the income it generates, independent of how the property is financed.
How to Calculate Cap Rate
Cap Rate = (Net Operating Income / Property Value) × 100
Net Operating Income (NOI) is your annual rental income minus all operating expenses (property taxes, insurance, maintenance, property management, etc.), but before mortgage payments.
What's a Good Cap Rate?
- 4-6% - Common in high-demand markets (NYC, SF, LA). Lower risk, higher appreciation potential.
- 6-8% - Typical for secondary markets. Balanced risk/reward.
- 8-10%+ - Found in tertiary markets or higher-risk properties. More cash flow, but may have less appreciation.
When to Use Cap Rate
- Comparing similar properties in the same market
- Evaluating properties regardless of financing
- Estimating property value from income
- Analyzing market trends over time
This calculator provides estimates for informational purposes only. Results depend on the accuracy of your inputs and do not constitute investment, financial, tax, or legal advice. Consult qualified professionals before making investment decisions.