Propdealcalc

Cap rate calculator

The capitalization rate is a property's net operating income divided by its price: the yearly return if you bought it with cash.

$
Rent plus other income, for a full year.
%
$per year
Not the mortgage.
$
%
For example, the cap rate of similar sales.
Cap rate5.55%
Net operating income$22,200per year
Value at a 6% cap rate$370,000

Formula

Cap rate = net operating income ÷ property value. Net operating income is rent and other income after vacancy, minus operating expenses such as tax, insurance, maintenance and management. Mortgage payments are not included.

What is a good cap rate?

There is no single answer. Cap rates are lower where investors expect steady rents and rising values (prime city locations, newer buildings) and higher where the risk is greater. Compare a property with similar ones in the same area and of the same type, not with a national average.

A higher cap rate means more income for the price, but often also more risk: older buildings, weaker areas or less reliable tenants.

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