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Cap rate calculator
See the income yield implied by a property price, before financing. Enter your annual net operating income and purchase price.
Income after operating expenses, before loan payments and income taxes.
Property price, excluding closing costs and financing fees.
Cap rate
Cap rate measures one year of income. It does not include loan costs, closing costs, capital spending or sale proceeds.
Example amounts are prefilled. Change any field to see your result instantly. Your financial inputs stay in this browser.
How to calculate cap rate
Capitalization rate compares one year of net operating income (NOI) with the property price. NOI is rental and other operating income less vacancy and operating expenses. It excludes debt service, income taxes and depreciation. Use a consistent treatment of reserves when comparing properties.
Cap rate = annual NOI / purchase price × 100
Worked example
A property with $600,000 in annual NOI and a $10,000,000 purchase price has a cap rate of $600,000 / $10,000,000 × 100 = 6.00%.
Frequently asked questions
Does cap rate include mortgage payments?
No. Cap rate uses NOI before financing. Use cash-on-cash return to compare cash flow after debt service with invested equity.
Should I use current or projected NOI?
Use current NOI for an in-place cap rate and stabilized NOI for a stabilized cap rate. Label the year and assumptions so the two are not confused.
What is a good cap rate?
There is no universal target. Property condition, location, lease quality, future capital needs and income risk all affect the yield a buyer may require.
See how the full model works in our engine methodology or review a worked property example.