Finance
Cap Rate Calculator
Calculate capitalization rate for rental property. Solve for cap rate, value, or NOI, or build NOI from rent, vacancy, and operating expenses.
Cap rate inputs
NOI excludes mortgage payments, depreciation, and capex.
Capitalization rate
8.00%
Cap rate band: above average
- Net operating income
- $80,000.00
- Monthly NOI
- $6,666.67
- Property value
- $1,000,000.00
- Simple payback (years)
- 12.5
Frequently Asked Questions about the Cap Rate Calculator
How do you calculate a property's cap rate?
Divide annual net operating income by the property's market value, then multiply by 100. An $80,000 NOI on a $1,000,000 building works out to an 8% cap rate. NOI is rental income minus operating expenses, before mortgage payments.
What counts as net operating income?
NOI is effective gross rent (gross rent minus vacancy loss) minus operating expenses: property tax, insurance, maintenance, repairs, utilities you pay, and management fees. NOI excludes mortgage principal and interest, depreciation, income taxes, and capital expenditures.
What is a good cap rate?
There is no single right answer, only a tradeoff between risk and return. Class A buildings in premium markets often trade at 4% to 6%. Class B suburban properties typically land between 6% and 8%. Class C and secondary-market deals can clear 8% to 10% or more, but with higher operating risk.
Why does cap rate exclude the mortgage?
Cap rate measures the property itself, not your financing. Two investors can buy the same building at very different leverage and still see the same cap rate. To factor in your loan, look at cash-on-cash return or levered IRR instead.
How is cap rate different from ROI?
Cap rate is a snapshot of unlevered first-year yield: NOI divided by purchase price. ROI is broader and usually includes appreciation, principal paydown, and tax effects over your full hold period.