Cap Rate Calculator
Calculate a property’s capitalization rate from net operating income and property value.
How to Use the Cap Rate Calculator
Enter annual net operating income and the property’s current value or purchase price. The calculator divides NOI by property value and expresses the result as a percentage.
Practical Example
A property generating USD 60,000 of annual NOI and valued at USD 750,000 has an 8.0% capitalization rate.
Factors That Affect Cap Rate
Location, property type, vacancy, rent growth, operating expenses, interest rates and perceived risk can all influence market cap rates.
Frequently Asked Questions
What is the cap rate formula?
Cap Rate = Net Operating Income ÷ Property Value × 100.
Does cap rate include mortgage payments?
No. NOI and cap rate are generally calculated before financing costs.
Is a higher cap rate always better?
No. Higher cap rates may also reflect higher investment risk.
What Cap Rate Measures
Capitalization rate is generally net operating income divided by property value or purchase price. It is an unlevered property measure and does not directly include mortgage financing. Market rent assumptions, vacancy, operating expenses and deferred maintenance can materially change NOI and therefore the cap rate.
What Cap Rate Measures
Capitalization rate is generally net operating income divided by property value or purchase price. It is an unlevered property measure and does not directly include mortgage financing. Market rent assumptions, vacancy, operating expenses and deferred maintenance can materially change NOI and therefore the cap rate.