Cap Rate
- Created by
- Renato Passos, Eng. de Software
- Reviewed by
- Renato Passos, Eng. de Software
Last updated: Apr 18, 2026
About this calculator
The Cap Rate calculator helps evaluate the profitability of real estate investments, especially in Real Estate Investment Trusts (REITs). It calculates the ratio between annual Net Operating Income (NOI) and property value, expressed as a percentage. This metric is essential for comparing different real estate investment opportunities.
The formula used is: Cap Rate = (Annual NOI / Property Value) × 100. For example, if a property generates $50,000 in annual net rentals and costs $1,000,000, the Cap Rate will be 5%. This value reflects the initial return on investment, excluding acquisition costs or debts.
Use this calculator when comparing returns across REITs or physical properties. The Cap Rate is particularly useful for identifying assets with attractive returns. However, consider other factors like rent growth potential, location, and market risks when making investment decisions.
Note that the Cap Rate does not predict future performance. A high rate indicates higher risk but potential for greater returns, while a low Cap Rate suggests lower stability. Always combine this metric with analysis of Debt-to-EBIT and REIT liquidity.
Frequently asked questions
Does Cap Rate measure actual profitability?
Yes, it measures the ratio of annual net rental income to property value, but excludes acquisition costs and debts. It shows initial return potential.
How to calculate Cap Rate manually?
Divide annual net operating income (NOI) by property value and multiply by 100. Example: $60,000 / $1,200,000 = 5%.
What is considered a good Cap Rate?
It varies by region and property class, but 5-8% is common for Brazilian REITs. Rates above 10% may indicate higher risk.
Does Cap Rate predict future performance?
No, it reflects current returns based on historical data. Market changes can alter actual results.
Can I compare REITs using only Cap Rate?
Not sufficient. Also analyze net debt, rent growth potential, and fund liquidity for a complete evaluation.