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Cap rate calculator

Capitalization rate = annual net operating income ÷ purchase price. It's a quick way to compare properties without financing.

Property
%
Taxes, insurance, repairs, management, HOA, utilities – not the mortgage
Valuation
%

Results

Net operating income (annual)–
Value at target cap rate–
Cap rate–

Cap rate formula

NOI = gross rent − vacancy − operating expenses
Cap rate = NOI ÷ price × 100

Example: a property with $12,000 of NOI bought for $200,000 has a 6.0% cap rate. Turned around, $12,000 of NOI is worth $200,000 at a 6% cap rate.

The mortgage payment and depreciation are not included in NOI. Cap rate measures the property itself, not your financing. To account for the loan, use the cash-on-cash return calculator.

Related calculators

GRM & 1% rulePrice ÷ annual rent, with a 1% rule check.Cash flow calculatorMonthly NOI, mortgage, cash flow and DSCR.ROI & IRR calculatorHold-and-sell projection with IRR and equity multiple.

FAQ

What is a good cap rate?

It depends on the market and property type. Lower-risk, high-demand areas tend to trade at lower cap rates and riskier areas at higher ones. Compare against recent sales of similar properties nearby, not a national rule of thumb.

Does cap rate include the mortgage?

No. Cap rate uses NOI, which comes before debt service. To see the return on the cash you put in after the mortgage, use cash-on-cash return.

Should I use asking price or market value?

For a purchase, use the price you'd pay. For a property you already own, use its current market value to see the return on the equity tied up in it.