REAL ESTATE
Build the property NOI first, then calculate capitalization rate from a more complete operating picture.
Enter Property value, Monthly gross rent, Vacancy allowance, Annual property taxes, and the other fields shown. Calculate capitalization rate (cap rate) from net operating income and property value to evaluate rental property yield.
The cap rate shows annual net operating income as a percentage of property value or purchase price. Use it to compare property income performance before financing costs.
Capitalization rate is generally modeled as annual net operating income divided by property value or acquisition price, multiplied by 100. Financing payments are normally kept outside NOI so cap rate can compare the property itself.
Results are estimates based on the values entered. Review the Methodology and Calculator Disclaimer for important limitations.
Cap rate generally focuses on net operating income relative to property value and normally excludes financing. Cash flow after debt service answers a different question.
If expenses are omitted or financing is incorrectly included in net operating income, the cap rate no longer represents the same operating metric.
No. A higher rate can reflect higher income, a lower price or greater perceived risk. Property condition, location, financing and future costs still matter.
Want the context behind the numbers?
Read cap rate, cash flow and financing separately →