Cap Rate Calculator (Capitalization Rate)
Calculate Capitalization Rate (Cap Rate) for commercial and residential real estate properties to compare unleveraged investment yields.
What this calculator does
The Cap Rate Calculator (Capitalization Rate) estimates your result instantly from the values you enter, using standard real estate formulas. Calculate Capitalization Rate (Cap Rate) for commercial and residential real estate properties to compare unleveraged investment yields. Calculations run in your browser, so nothing you type is sent to a server, and the output is an estimate for planning rather than financial advice.
About Cap Rate Calculator (Capitalization Rate)
The Cap Rate Calculator computes the Capitalization Rate of a real estate asset, measuring the property's natural unleveraged rate of return independent of financing terms.
Formula & Mathematical Calculation
Cap Rate (%) = ( Net Operating Income (NOI) / Current Property Market Value or Purchase Price ) × 100
Calculation Example
$500,000 Property generating $35,000 Net Operating Income (NOI): Cap Rate = ($35,000 / $500,000) × 100 = 7.00%.
Key Benefits
- Calculates pure unleveraged property rate of return (Cap Rate)
- Enables direct apples-to-apples comparison between different real estate assets
- Solves for Property Value based on target market Cap Rate (Valuation = NOI / Cap Rate)
- Essential for multifamily, retail, office, and residential rentals
- Instant commercial underwriting tool
How to Use this Calculator
-
Enter Net Operating Income (NOI)
Input annual gross rent minus operating expenses (before mortgage payments). -
Enter Property Purchase Price or Market Value
Input current asset valuation. -
Calculate Cap Rate
Click Calculate to view property capitalization rate.
Assumptions & Limitations
What the calculation assumes
- Every value you enter is treated as an exact, known amount.
- Rates and contributions are assumed to stay constant for the whole period unless the form asks for them separately.
- Results use standard financial formulas and ignore fees, penalties and promotional terms that are not entered above.
- Inflation, tax changes and market volatility are not modelled unless a field for them is provided.
- Amounts are unit-agnostic: results are returned in the same currency you enter.
What it does not cover
- Cap Rate Calculator (Capitalization Rate) produces estimates for education and planning, not a quote, offer or professional advice.
- Real-world outcomes differ when fees, taxes, rounding rules or provider-specific terms apply.
- Local regulations and tax rules vary by country and change over time; verify current rules for your jurisdiction.
- Figures are only as accurate as the inputs you supply — check them before acting on the result.
- For decisions with lasting financial impact, confirm the numbers with a qualified professional.
Frequently Asked Questions
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