Cap Rate Calculator
Calculate Cap Rate
Find the cap rate from NOI and property value
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Estimate Property Value
Estimate property value from NOI and desired cap rate
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Formula
Cap Rate = (Annual NOI / Property Value) × 100 | Property Value = NOI / Cap Rate
Frequently Asked Questions
What is a cap rate?
Capitalization rate (cap rate) is the ratio of a property's Net Operating Income (NOI) to its market value. Cap Rate = NOI / Property Value. It measures the expected rate of return on a real estate investment, independent of financing.
What is a good cap rate?
A 'good' cap rate depends on market and risk tolerance. Generally, 4-6% is typical in stable urban markets, 6-8% in suburban areas, and 8-12% in higher-risk or rural markets. Higher cap rates mean higher potential returns but usually more risk.
How is cap rate different from ROI?
Cap rate uses NOI (before mortgage payments) divided by property value, so it measures property performance regardless of financing. ROI (or cash-on-cash return) factors in your actual cash invested and debt payments, measuring your personal return after leverage.
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