Cap Rate Calculator
Calculate the capitalization rate for an investment property.
Enter property price and annual net operating income.
Capitalization Rate
Cap Rate measures the expected rate of return on a real estate investment.
Cap Rate = (Annual Net Operating Income / Property Price) × 100
Net Operating Income (NOI):
NOI = Gross Rental Income - Operating Expenses
Operating expenses include property tax, insurance, maintenance, management fees, and vacancy allowance. NOI does not include mortgage payments.
Cap rate benchmarks:
| Cap Rate | Assessment |
|---|---|
| 2–4% | Low return (premium market, lower risk) |
| 4–6% | Moderate return (balanced) |
| 6–8% | Good return (secondary markets) |
| 8–10% | High return (higher risk areas) |
| 10%+ | Very high return (check for hidden risks) |
A higher cap rate means higher potential return but usually higher risk.