Cap Rate Calculator
Calculate the capitalization rate of a real estate investment by dividing net operating income by the property's current market value. The cap rate measures expected return independent of financing.
This free online cap rate calculator provides instant results with no signup required. All calculations run directly in your browser — your data is never sent to a server. Enter your values below and see results update in real time as you type. Perfect for everyday calculations, homework, or professional use.
Annual income from the property after operating expenses, before debt service.
Current market value or purchase price of the property.
How to Use This Calculator
Enter your input values
Fill in all required input fields for the Cap Rate Calculator. Most fields include unit selectors so you can work in your preferred unit system — metric or imperial, whichever matches your problem.
Review your inputs
Double-check that all values are correct and that you have selected the right units for each field. Incorrect units are the most common source of calculation errors and can produce results that are off by factors of 2, 10, or more.
Read the results
The Cap Rate Calculator instantly computes the output and displays results with units clearly labeled. All calculations happen in your browser — no loading time and no data sent to a server.
Explore parameter sensitivity
Try adjusting individual input values to see how the output changes. This is a quick and effective way to develop intuition about how different parameters influence the result and to identify which inputs have the largest effect.
Formula Reference
Cap Rate Calculator Formula
See calculator inputs for the governing equation
Variables: All variables and their units are labeled in the calculator interface above. Input fields accept values in multiple unit systems — select your preferred unit from the dropdown next to each field.
When to Use This Calculator
- •Use the Cap Rate Calculator when comparing financial options side-by-side — such as different loan terms or investment returns — to make more informed decisions.
- •Use it to quickly estimate costs or returns before making purchasing, investment, or borrowing decisions.
- •Use it for financial education and planning to understand how compound interest, fees, or tax affects the real value of money over time.
- •Use it when building or reviewing a budget to verify that projections and calculations are mathematically correct.
About This Calculator
The Cap Rate Calculator is a free financial calculation tool designed to help individuals and businesses understand key financial concepts and estimate costs, returns, and loan parameters. Calculate the capitalization rate of a real estate investment by dividing net operating income by the property's current market value. The cap rate measures expected return independent of financing. The calculations are based on standard financial mathematics formulas. Results are for informational and educational purposes only and should not be considered financial, investment, or tax advice. Consult a qualified financial professional before making financial decisions. All calculations are performed in your browser — no personal financial data is stored or transmitted.
About Cap Rate Calculator
The capitalization (cap) rate calculator divides a property's net operating income (NOI) by its market value to express the property's unlevered return as a percentage. Cap rate is the most commonly used metric in commercial real estate for comparing investment properties, assessing market conditions, and estimating property value. Unlike metrics that include financing, cap rate measures the property's intrinsic earning power independent of how it is financed. Higher cap rates generally indicate higher returns but also higher risk. Cap rates vary by property type, location, and market conditions: prime urban office buildings may have cap rates of 4-5%, while rural multifamily properties might be 8-10%.
The Math Behind It
Formula Reference
Cap Rate
Cap Rate = (NOI / Property Value) * 100
Variables: NOI = Net Operating Income; Property Value = market value or purchase price
Worked Examples
Example 1: Apartment building investment
A building generates $36,000/year NOI and is valued at $500,000.
The cap rate is 7.2%, which is typical for a multifamily property in a secondary market.
Example 2: Valuing a property from cap rate
NOI is $50,000 and market cap rate for similar properties is 6%.
The estimated property value is approximately $833,000.
Common Mistakes & Tips
- !Including debt service in operating expenses; NOI is calculated before mortgage payments.
- !Comparing cap rates across different property types or markets without adjusting for risk differences.
- !Using asking price instead of market value, which can distort the cap rate.
Related Concepts
Frequently Asked Questions
What is a good cap rate?
It depends on the market and property type. Prime urban properties: 4-5%. Suburban multifamily: 5-7%. Rural or higher-risk: 8-12%. Higher cap rates mean higher returns but also higher risk.
How does cap rate relate to property value?
Inversely. If cap rates compress (fall), property values rise, and vice versa. A cap rate decrease from 6% to 5% increases a property's value by 20% for the same NOI.
Does cap rate include mortgage payments?
No. Cap rate uses NOI, which is before debt service. This allows comparison of properties regardless of how they are financed. Cash-on-cash return is used to measure returns after financing.