Cap Rate Calculator
Calculate your property's capitalization rate and analyze your real estate investment potential
Income Breakdown
Expense Breakdown
Cap Rate Analysis
Your cap rate of 8.2% indicates:
- Good return potential for this type of property
- Competitive investment opportunity
- Consider market comparables in your area
📊 Cap Rate Calculator – Instantly Evaluate Rental Property ROI
If you’re investing in real estate, one of the most important numbers you’ll need to understand is the capitalization rate (or cap rate). It tells you how profitable a property is compared to its price—and whether it’s worth the investment. Our Cap Rate Calculator allows you to work this out in just a few seconds by using your net operating income (NOI) and the property’s purchase price.
💡 What Is a Cap Rate?
The cap rate is a simple percentage that shows how much return you’re earning on a rental property without including mortgage payments. It is calculated using this formula:
Cap Rate (%) = (Net Operating Income ÷ Purchase Price) × 100
Example:
If your yearly net operating income is $15,000 and the property cost $250,000:
(15,000 ÷ 250,000) × 100 = 6% cap rate
🧮 How to Use the Cap Rate Calculator
Just enter the following two values:
| Field | Description |
|---|---|
| Net Operating Income (NOI) | Annual rental income – operating expenses |
| Purchase Price | Total price you paid for the property |
Click calculate and the tool will provide your cap rate instantly.
👉 Try it together with our ROI Calculator to compare long-term investment returns.
✅ Why Cap Rate Matters
- Helps compare multiple rental properties
- Gives a quick snapshot of profitability
- Works great for buy-and-hold investors
- Useful even when you’re just window shopping
Most investors look for cap rates between 5% and 10% (depending on location and market trends).
📈 What Is a Good Cap Rate?
| Cap Rate | Interpretation |
|---|---|
| 3–5% | Low return → usually safer/low-risk markets |
| 5–8% | Balanced → most residential rental properties |
| 8–12% | High return → higher risk or undervalued property |
Keep in mind: location and property condition always play a role. A 10% cap rate in a declining neighborhood may still be a bad investment.
🌎 External Resources
- Learn how pros use cap rate: Click here
- Browse rental cap rates by city: Click here
- Compare data from different regions: Click here
⚠️ Limitations of the Cap Rate Calculator
- Does not include mortgage payments
- Does not include closing costs and taxes
- Uses current income and expenses (future values can change)
For a deeper analysis, pair this with cash-on-cash return and internal rate of return (IRR) calculations.
🧠 Final Thoughts
The Cap Rate Calculator is an ideal first step for analyzing a property’s potential return. It’s simple, quick, and accurate — making it perfect for investors at every level. Use it before you buy, compare different listings, and make smarter real estate decisions.
📌 Also try our Mortgage Calculator if you plan to finance your investment.