Cap Rate Calculator
Free cap rate calculator: enter a property's annual net operating income and value to get its capitalization rate - the key metric for rental investors.
About this tool
The capitalization rate - cap rate - is the one number that lets you compare any two income properties apples-to-apples: annual net operating income divided by price. A $1.5M building earning $120,000 a year is an 8% cap rate, whether it is apartments in Austin or a warehouse in Leeds.
Higher cap rate means higher yield but usually higher risk; lower means safer, pricier markets. Investors use it to screen deals in seconds, value properties from their income, and decide if a price is fair before ever touring the building.
How to use
Enter the property's annual net operating income (rent minus operating expenses, before mortgage payments) and its value or asking price. Press Calculate Cap Rate.
You get the cap rate as a percent plus the monthly NOI for context. Compare it against similar properties in the same market - the spread between deals is where the opportunity (or the warning) hides.
The math behind it
Cap rate = (net operating income / property value) x 100. Rearranged, it values property too: value = NOI / cap rate, so a building earning $120,000 in a 6% market is 'worth' $2,000,000.
NOI excludes financing: mortgage payments, income taxes and depreciation stay out, because the cap rate measures the property, not your loan structure.
Frequently asked questions
What is a good cap rate?
Is a higher cap rate always better?
Does the cap rate include my mortgage?
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