Cap Rate Calculator

Calculate the capitalization rate for real estate investments β€” the annual return you earn relative to the property's total value.

CAPITALIZATION RATE

8%

MONTHLY INCOME

$10.00K

ANNUAL NOI

$1.20L

πŸ’‘ Cap Rate: The Fundamental Real Estate Investment Metric

The Capitalization Rate (Cap Rate) is the single most important metric in commercial real estate investing. It expresses the property's annual net operating income (NOI) as a percentage of its current market value or purchase price. Cap Rate = NOI Γ· Property Value Γ— 100.

A higher cap rate indicates higher yield but often implies higher risk (e.g., secondary markets, older properties, shorter lease terms). Lower cap rates typically signal prime locations with stable, long-term tenants. Cap rates allow instant comparison between properties of different sizes, prices, and locations β€” normalizing everything to a yield percentage.

$120K annual NOI on a $1.5M property = 8% Cap Rate. This means you earn 8 cents of net operating income for every dollar invested β€” before financing costs and taxes. The same NOI on a $2M property drops to 6% Cap Rate.

Cap Rate Calculator FAQ

πŸ”— Related Calculators

ROI CalculatorCalculate Return on Investment from total gain and investment cost. Compare ROI across different business and investment opportunities.Rental Property CalculatorAnalyze rental property investments with cash flow projections, cap rate, cash-on-cash return, NOI, and investment rule screening (1% rule, 50% rule, GRM).WACC CalculatorCalculate Weighted Average Cost of Capital from equity, debt, cost of equity, cost of debt, and tax rate. Essential for DCF valuation.Net Worth CalculatorCalculate personal or business net worth from total assets and liabilities. Track financial progress and set wealth-building goals.