Cap Rate Calculator
Calculate capitalization rate for investment properties
About this calculator
The Cap Rate Calculator helps real estate investors determine the capitalization rate of investment properties by comparing annual net operating income to property value. This essential metric allows investors to evaluate property profitability, compare different investment opportunities, and make informed decisions about buying, selling, or holding rental properties. A higher cap rate typically indicates better cash flow potential, while lower rates may suggest stable, appreciating markets with lower immediate returns but potential long-term value growth.
How to use
Enter your property's annual net operating income (rental income minus operating expenses like taxes, insurance, and maintenance). Then input the current market value or purchase price of the property. The calculator will instantly compute your capitalization rate as a percentage, helping you assess the property's investment performance.
Frequently asked questions
What is a good cap rate for rental property?
Generally, cap rates between 4-10% are common, with 6-8% considered good. Higher rates indicate better cash flow but potentially higher risk markets.
How do I calculate net operating income?
Subtract all operating expenses (taxes, insurance, maintenance, management fees) from your gross rental income. Don't include mortgage payments in operating expenses.
Should I use purchase price or current market value?
Use purchase price to evaluate your actual return, or current market value to assess whether to hold or sell the property.