Cap Rate Calculator
The capitalization rate (cap rate) measures a property's annual return regardless of financing.
Taxes, insurance, maintenance, management — not mortgage
Cap Rate
6.00%
NOI: $24,000/yr
💡 Plain English: A $400,000 property with $24,000/year in net operating income has a 6.00% cap rate. That's a solid return for most markets. Higher cap rates mean more income relative to price — but also potentially riskier areas.Cap rate excludes mortgage costs — it measures the property itself, not your financing.
About the Cap Rate Calculator
The capitalization rate (cap rate) is a quick way to compare investment properties. It expresses a property’s annual net operating income as a percentage of its price — ignoring financing — so you can judge returns on an all-cash basis.
How this calculator works
Enter the property’s purchase price and its annual net operating income (rental income minus operating expenses, before debt service). The calculator shows the cap rate as a percentage.
The math, in plain English
Cap rate = net operating income (NOI) ÷ purchase price × 100. NOI = gross rental income − operating expenses (excluding mortgage payments).
Key terms
- •Cap rate — the unlevered annual return on a property
- •Net operating income (NOI) — income after operating expenses but before debt service
- •Unlevered — ignoring the effect of a mortgage
Tips & things to know
- ✓Cap rate ignores financing, so it lets you compare properties before deciding how to pay.
- ✓Higher cap rates usually mean higher risk or lower-quality properties.
- ✓Compare cap rates only between similar properties in similar markets.
Frequently asked questions
What is a good cap rate?+
It depends on the market. Many investors look for 5–10%, with higher rates in higher-risk areas.
Does cap rate include the mortgage?+
No. Cap rate is an unlevered metric — it uses net operating income before any debt service.
This calculator is for educational purposes only and uses estimates. Always consult a licensed mortgage professional for advice specific to your situation.