🏢 Cap Rate Calculator
Calculate the Capitalization Rate of a real estate investment property.
Enter Property Details
$
$
Annual Income MINUS Annual Expenses
Don't know your NOI? Calculate it here:
$
$
Capitalization Rate
0%
NOI: $0
What is Cap Rate?
The Capitalization Rate (Cap Rate) is the most popular metric used to evaluate the profitability and risk of real estate investments. It represents the annual return an investor would make if they bought the property entirely with cash (no mortgage).
Cap Rate = (Net Operating Income ÷ Property Value) × 100
How to calculate Net Operating Income (NOI)?
Your NOI is the total money the property makes after paying for its day-to-day operations. It does not include your mortgage payments or income taxes.
- Gross Income: Total rent collected, parking fees, laundry income, etc.
- Operating Expenses: Property taxes, insurance, maintenance, property management fees, HOA fees, utilities, and vacancy allowance.
- NOI Formula: Gross Income − Operating Expenses = NOI
Frequently Asked Questions
Does Cap Rate include my mortgage? +
No. Cap rate deliberately ignores your mortgage payments (debt service). This allows investors to compare the pure profitability of two different properties side-by-side, regardless of how they are financed. If you want to include your mortgage, you should calculate Cash-on-Cash Return instead.
Is a higher Cap Rate always better? +
Not necessarily. A high cap rate (e.g., 10%+) often indicates a higher risk property, perhaps in an older building or a neighborhood with lower appreciation potential. A low cap rate (e.g., 4%) usually indicates a safe, high-demand area with strong property value appreciation.