Cap Rate Calculator
Calculate the capitalization rate (cap rate) for real estate investments. Enter property value and net operating income to evaluate return on investment.
Published by:
isCalculator Editorial Team
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How to use this tool?
How to Use the Cap Rate Calculator
This calculator computes the Capitalization Rate (Cap Rate), a key metric for evaluating real estate investment profitability.
- Enter Property Value – Input the total market value or purchase price of the property in dollars (e.g., 500000). Must be greater than 0.
- Enter Net Operating Income (NOI) – Input the annual income after operating expenses (e.g., 50000). Can be 0 or positive.
- Click "Calculate Cap Rate" – The result displays as a percentage.
Formula: Cap Rate = (NOI ÷ Property Value) × 100%
Interpretation: A higher cap rate indicates higher potential return but often higher risk. Compare with similar properties or market averages.
Note: All values must be in US dollars. Use positive numbers only. Errors show in red.
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Frequently Asked Questions
Cap rate (capitalization rate) is a metric used in real estate to evaluate the potential return on an investment property, calculated as Net Operating Income divided by property value.
A good cap rate varies by market and investor goals, typically ranging from 4% to 12%. Higher cap rates indicate higher potential return but also higher risk.
Yes, if the Net Operating Income is negative (property expenses exceed income), the cap rate will be negative, indicating a loss.
