Cap Rate Calculator
Calculate the capitalization rate of a rental property from its income and value.
A property's return at a glance
The cap rate expresses a rental property's annual net operating income as a percentage of its value, giving a quick measure of the return it produces independent of financing. This works it out, so you can compare properties on the same basis, the way property investors do.
Enter the net operating income and property value to see the cap rate.
What it captures and what it doesn't
Cap rate is useful because it strips out how a property is financed, letting you compare the underlying return of different properties directly. But it uses net operating income — rent after operating expenses, but before mortgage payments — so it is not your actual cash return once a loan is factored in. It also ignores future appreciation and rent growth, and a higher cap rate is not simply better, since it often reflects higher risk or a less desirable area. So cap rate is one lens among several, best used to compare similar properties rather than as a verdict. This is a calculation, not investment advice; property investing has many factors a single rate cannot capture.
Cap Rate Calculator FAQ
What does cap rate measure?
A property's net operating income as a percentage of its value — the return independent of how it is financed, useful for comparing properties.
Is a higher cap rate always better?
No — a higher cap rate often reflects higher risk or a less desirable location. It is one measure among several, not a verdict.
Is this investment advice?
No — it is a calculation. Property investment involves many factors a single rate cannot capture, and warrants your own research or a professional.