What is cap rate?
Capitalization rate = NOI divided by property value.
Cap Rate Calculator
Measure an income property’s unlevered yield as NOI divided by market value or purchase price.
Enter NOI and property value
NOI is income after operating expenses but before debt service and income taxes.
About this calculator
How to use Cap Rate Calculator, plus the formulas and logic behind the results.
Tool description
Cap rate expresses expected annual NOI as a percentage of property value. Higher cap rates often imply higher risk or lower growth expectations.
How to use
- Enter annual NOI.
- Enter property purchase price or market value.
- Select Calculate to view cap rate.
- Compare only similar properties in similar markets.
Formulas & reference
Cap rate = NOI ÷ Property valueCap rate % = (NOI ÷ Property value) × 100Implied value = NOI ÷ Cap rate (rearranged)
Cap rate notes
- NOI excludes mortgage payments
- Use stabilized annual NOI
- Market comps matter more than a single number
- Educational metric only
Calculation logic
NOI is divided by property value and shown as a percent. Value must be positive.
Cap rate ignores financing. Cash-on-cash return differs when leverage is used.
Cap Rate Calculator FAQ
Common questions about the calculation and how to interpret the estimate.
What is NOI?
Net operating income: rental income minus operating expenses, before debt service.
Is a higher cap rate better?
It means higher yield, often with higher risk—not automatically “better.”
Does cap rate include the mortgage?
No. It is an unlevered property yield.
Going-in vs exit cap rate?
Going-in uses purchase price; exit uses expected sale value and forward NOI.
Can NOI be negative?
Yes—then the cap rate is negative, signaling operating losses.