Calculate capitalization rate from NOI and purchase price.
Cap rate
4.44%
The cap rate calculator converts net operating income (NOI) and purchase price into a capitalization rate, a core metric for comparing rental investments. It adjusts for vacancy and common operating expenses to approximate stabilized NOI.
Investors and brokers can use this tool to benchmark properties against local market cap rates and risk profiles. Higher cap rates often indicate more risk and potentially higher returns, while lower cap rates are typical in premium, supply-constrained locations.
Cap rate, or capitalization rate, is a ratio of a property's net operating income to its purchase price or value, expressed as a percentage. It is important because it helps investors quickly compare the income potential and risk profile of different properties. You can calculate it instantly with this Cap Rate Calculator.
To calculate NOI, subtract all reasonable operating expenses—such as taxes, insurance, maintenance, and management—from your effective rental income, but do not subtract mortgage payments. This calculator helps you estimate NOI and cap rate at the same time, and you can analyze detailed cash flow with our Cash Flow Calculator.
A higher cap rate is not always better, because it often reflects higher risk, weaker locations, or more intensive management. Lower cap rates are typical in strong, supply-constrained markets where investors are willing to accept lower yields for more stability. You can compare cap rates across deals and then analyze overall returns with our Property Investment Analyzer.
Traditional cap rate calculations ignore financing and are based only on NOI and purchase price, but your real return also depends on your loan terms and cash invested. To see the full picture, combine cap rate from this tool with cash-on-cash and ROI metrics from our ROI Calculator and Property Investment Analyzer.
A "good" cap rate depends on your market, asset type, and risk tolerance—core properties in top-tier markets often trade at lower cap rates, while value-add deals in secondary markets show higher caps. Use this calculator to evaluate individual properties and compare them to recent sales or broker guidance. Then check projected cash flow with our Cash Flow Calculator.