Cap Rate Calculator — Real Estate Valuation

Our Cap Rate Calculator helps you evaluate real estate investment opportunities. Here's how to use it:

Step 1: Enter the Net Operating Income (NOI). This is annual rental income minus operating expenses (property taxes, insurance, maintenance, management fees). Do NOT subtract mortgage payments.

Step 2: Enter the property value or purchase price.

Step 3: Click 'Calculate' to see the Cap Rate percentage.

Alternatively, enter the Cap Rate and NOI to estimate property value, or enter Cap Rate and property value to determine required NOI.

Cap Rate calculations:

Cap Rate = (Net Operating Income / Property Value) × 100

Related formulas: Property Value = NOI / Cap Rate NOI = Property Value × Cap Rate

Important: NOI is calculated as: NOI = Gross Rental Income - Operating Expenses

Operating expenses include: property taxes, insurance, maintenance, management fees, utilities (if landlord-paid), HOA fees.

NOI does NOT include: mortgage payments, depreciation, or income taxes.

The Capitalization Rate (Cap Rate) is the most fundamental metric in real estate investing. It represents the rate of return you can expect on an income-producing property, assuming you paid all cash (no mortgage). This allows investors to compare properties objectively, regardless of how they're financed.

Cap Rate tells you what percentage of your investment will return to you annually through net operating income. For example, a 7% Cap Rate means you'll receive $7,000 per year in NOI for every $100,000 of property value.

General Cap Rate guidelines: • 4-6%: Lower risk, stable markets (Class A properties in prime locations) • 6-8%: Balanced risk/reward (Class B suburban properties) • 8-10%+: Higher risk, emerging areas, or properties needing work

Remember: Lower Cap Rates generally indicate lower risk and higher property quality, while higher Cap Rates suggest more risk but potentially better returns.