Cap Rate Calculator
Capitalization rate from Net Operating Income — excludes financing, by design.
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About the Cap Rate Calculator
Calculates capitalization rate (cap rate) — Net Operating Income divided by current property value — the standard metric real-estate investors use to compare properties independent of how each is financed.
- Enter the property's current value and gross annual rental income.
- Enter annual operating expenses — excluding mortgage payments and capital improvements.
- Read the cap rate and NOI.
A $350,000 property with $30,000 in annual rental income and $9,000 in annual operating expenses: NOI of $21,000, for a 6.00% cap rate.
| Range | Common association |
|---|---|
| 3-5% | Lower-risk, high-demand, high-cost metro areas |
| 5-8% | Commonly cited target range for many investors |
| 8%+ | Higher-risk, secondary, or distressed markets |
Cap rate is calculated before financing — NOI excludes mortgage principal/interest and capex by standard convention. This makes it ideal for comparing properties, but it's NOT your actual cash return if you have a mortgage — see Landlord ROI for that.
- • Never compare cap rate to your mortgage rate directly.
- • A lower cap rate isn't necessarily bad — it often reflects a lower-risk, more stable market.
- • Always confirm what's included in a seller's quoted NOI.
- BiggerPockets — Cap Rate: What It Is and How to Calculate It — accessed 2026-08-30
Illustrative estimate only, not financial or tax advice. Verify figures with a licensed adviser or your local tax authority.