Cap Rate Calculator
Calculate the capitalization rate for any investment property to compare deals across markets.
Your Numbers
Results
Annual Gross Rent
$24,000
Monthly rent x 12
Effective Gross Income
$22,800
After vacancy loss
Net Operating Income
$16,800/yr
Income minus operating expenses
Cap Rate
6.7%
NOI / purchase price
Formula
Cap Rate = (Net Operating Income / Purchase Price) x 100
Net Operating Income (NOI) is your annual rental income minus operating expenses (vacancy, management, maintenance, taxes, insurance). It does not include mortgage payments.
What is it
What is Cap Rate?
The capitalization rate (cap rate) measures a property's unlevered return — the income it generates as a percentage of its price, regardless of how you finance it. It's the most common metric for comparing properties across different markets.
Why it matters
Why it matters
Cap rate lets you compare apples to apples. A property in Austin and a property in Cleveland with the same cap rate are generating the same return relative to their price. Financing decisions come later — cap rate tells you if the underlying deal is sound.
Benchmarks
What's a good cap rate?
Cap rates vary by market and property type. In general: 4-6% in expensive coastal markets, 6-8% in mid-tier cities, and 8-12% in tertiary markets or higher-risk properties. A higher cap rate means higher return but typically more risk.
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