Cap Rate Calculator
Calculate capitalization rate — the core metric for evaluating rental property performance.
Calculate using NOI and property value, or build NOI from income and expenses.
Results
What Is Cap Rate?
Capitalization rate (cap rate) is the ratio of a property's Net Operating Income (NOI) to its current market value or purchase price. It represents the expected return on a real estate investment if purchased all-cash (no mortgage).
NOI = Gross Rental Income − Vacancy − Operating Expenses
Important: NOI does not include mortgage payments. Cap rate is a property-level metric independent of how the purchase is financed.
What Is a Good Cap Rate?
Cap rate benchmarks vary by property type, location, and market conditions. Generally: cap rates of 4–6% are typical in high-cost coastal markets where appreciation potential drives investor demand. Cap rates of 7–10% are more common in secondary markets and are seen as stronger cash-flow investments. Cap rates above 10% often indicate higher risk, such as challenging locations or significant required improvements.
A lower cap rate means investors are paying more per dollar of income — often because they expect appreciation. A higher cap rate means more income relative to price, typically in markets with less appreciation potential.