Cap Rate Calculator
Capitalization rate = NOI / Property Value × 100. Property's annual return excluding financing.
Result
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How to use this calculator
- Enter annual NOI (after operating expenses, before mortgage).
- Enter purchase or current value.
- Read cap rate; compare with comparable local properties.
About this calculator
Cap rate is the property's annual return based on NOI and current value, ignoring financing. Lower cap rates mean higher prices relative to income — common in expensive markets (NYC, SF) where investors bet on appreciation. Higher cap rates suggest more income but often more risk or location issues. Compare like-kind properties in the same market.
Frequently asked
Cap rate vs cash-on-cash return?+
Cap rate ignores financing. Cash-on-cash divides by money invested (cash down + closing). Same property looks very different on each metric — leverage amplifies cash-on-cash.
What's a "good" cap rate?+
Depends on market. 4-6% is typical for class-A in expensive metros, 7-10% for class-B in secondary markets, 10%+ for class-C / risk plays.
How does mortgage affect cap rate?+
It doesn't — cap rate uses NOI which is before mortgage. Used to compare properties without financing as a variable.
Is cap rate a discount rate?+
Not exactly. It's a one-year snapshot. The price you pay = expected NOI / cap rate is implicitly an inverse-multiple, like a P/E ratio for stocks.
Should I use current or future NOI?+
Trailing 12 months for stabilized properties. Pro-forma NOI for value-add deals — but be conservative.
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