Cap Rate Calculator

The capitalization rate is a property's net operating income divided by its value, shown as a percent. It estimates the annual return you would earn if you bought the property in cash, with no mortgage in the picture.

Cap rate equals net operating income divided by property value, multiplied by 100. As an example, 24,000 of NOI on a 400,000 property gives 24000 / 400000 times 100, which is a 6 percent cap rate.

NOI is gross annual income from rent and other sources minus operating expenses such as property taxes, insurance, maintenance, management fees and a vacancy allowance. It deliberately excludes mortgage payments, depreciation and income taxes.

Expand 'Need to work out NOI?' and enter your gross annual income and yearly operating expenses. It subtracts one from the other and, when you press 'Use this NOI', drops that figure into the main calculator for you.

Not necessarily. A higher cap rate means more income relative to price, but it often reflects higher risk, older buildings or a weaker location. A lower cap rate usually points to a safer, more in demand property that buyers will pay a premium for.

Yes. Switch 'Solve for' to Property value, enter the NOI and your target cap rate, and the tool divides NOI by the rate to show the price that would deliver that yield.

Cap rate is meant to compare properties on their own merits, independent of how any one buyer finances them. Two people paying different down payments would get different cash returns, but the cap rate stays the same, which makes it a cleaner benchmark.

Every output is rounded to two decimal places, so a cap rate reads to the hundredth of a percent and dollar figures to the nearest cent. The property value and NOI you enter must be greater than zero for the tool to solve.

No. The math runs locally in your browser, so your deal numbers are never sent to a server and the tool keeps working offline once loaded.