Cap Rate Calculator
Calculate the capitalization (cap) rate of an income-producing property to compare its return potential against other investments.
What is cap rate?
The capitalization rate (cap rate) is a common metric investors use to evaluate and compare the potential return of income-producing real estate, independent of financing. It expresses a property’s net income as a percentage of its value.
The formula
Cap Rate = Net Operating Income (NOI) / Property Value × 100, where NOI = Annual Rental Income – Annual Operating Expenses (before mortgage payments and taxes on income). A higher cap rate generally suggests higher potential return but often comes with higher risk.
This tool is for general educational purposes. Typical cap rates vary significantly by property type, location, and market conditions, so compare properties within the same market and category for the most meaningful results.