Cap Rate Calculator

About this calculator

The capitalization rate (cap rate) is one of the most widely used metrics in real estate investing. It measures a property's annual net operating income as a percentage of its current value, giving you a quick snapshot of its income potential independent of how it's financed. The formula is: Cap Rate = NOI ÷ Property Value × 100. You can enter NOI directly or use the "Break it down" mode to calculate it from gross rental income minus operating expenses. The result is compared against common cap rate tiers so you can see how the property stacks up in the market.

Field explanations

Property value / purchase price

The current market value or purchase price of the investment property. Use the asking price when evaluating a potential acquisition, or the current appraised value for an existing holding.

Annual NOI (direct entry)

Net Operating Income — gross rental income minus all operating expenses for the year. Operating expenses include property taxes, insurance, maintenance, property management, and utilities paid by the owner. Does not include mortgage payments, depreciation, or income tax.

Gross annual rental income

Total rent collected from all units over the year, assuming full occupancy. For a more conservative estimate, apply a vacancy factor (e.g. multiply by 0.95 for 5% vacancy) before entering the figure.

Annual operating expenses

All costs to operate the property excluding mortgage payments: property taxes, insurance, maintenance and repairs, property management fees, HOA dues, and owner-paid utilities. Subtracting these from gross income gives the NOI.