Cap Rate Calculator
Cap rate is the most important metric for comparing rental properties. This calculator shows your capitalization rate based on property value, rent, and operating expenses.
Cap Rate Calculator
Calculate capitalization rate and implied property values
Implied Property Value at Different Cap Rates
| Cap Rate | Implied Value | Price per $1 NOI |
|---|---|---|
| 4% | $600,000 | $25.00 |
| 5% | $480,000 | $20.00 |
| 6% | $400,000 | $16.67 |
| 7% | $342,857 | $14.29 |
| 8% | $300,000 | $12.50 |
| 10% | $240,000 | $10.00 |
Cap rate (capitalization rate) measures a property's rate of return based on net operating income relative to property value. Higher cap rates typically indicate higher risk or lower property values relative to income. Operating expenses include taxes, insurance, maintenance, utilities, and management — but not mortgage payments or capital expenditures.
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Frequently Asked Questions
What is a good cap rate?+
A "good" cap rate is 5-10%, depending on market and risk. High cap rates (8-12%) = higher return but often higher risk or less appreciation (Midwest, South). Low cap rates (3-5%) = lower risk, more appreciation (NYC, SF). Compare similar properties in the same market.
How do I calculate cap rate?+
Cap rate = Net Operating Income (NOI) ÷ Property value × 100. NOI = Annual rent − Operating expenses (before mortgage). Example: $24,000 rent − $8,000 expenses = $16,000 NOI ÷ $300,000 value = 5.33% cap rate.
Is cap rate the same as cash-on-cash return?+
No. Cap rate ignores financing (no mortgage consideration). Cash-on-cash return accounts for your actual mortgage payment and down payment. Two properties can have the same cap rate but very different cash-on-cash returns depending on financing.
What is a good cap rate?
A "good" cap rate is 5-10%, depending on market and risk. High cap rates (8-12%) = higher return but often higher risk or less appreciation (Midwest, South). Low cap rates (3-5%) = lower risk, more appreciation (NYC, SF). Compare similar properties in the same market.
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