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 (Capitalization Rate) Calculator is a tool to estimate property investment returns by dividing Net Operating Income (NOI) by the property's current value. This metric evaluates the profitability of income-generating real estate.
The formula used is: Cap Rate = NOI / Property Value. NOI is calculated by subtracting operating expenses from gross rental income. The result is a percentage showing the property's cash flow potential.
Use this calculator to compare investment opportunities, assess the financial health of an acquired property, or negotiate prices based on projected performance. It's commonly applied to commercial spaces, hotels, or rental apartments.
Caveats: Cap Rate relies on accurate NOI and market value data. It does not account for financing costs or future appreciation, only current performance.
Frequently asked questions
What does the Cap Rate measure?
The Cap Rate measures property profitability based on Net Operating Income (NOI) and current market value.
For which property types is this calculation used?
It applies to income-generating properties like rental apartments, commercial stores, or hotels, not to primary residences.
How does Cap Rate compare to return on investment (ROI)?
Cap Rate focuses only on operational returns, while ROI includes acquisition costs, financing, and long-term factors.
What is considered a good Cap Rate?
It depends on the market and risk. Typically, 6%, 10% is common, but prime locations may have lower rates due to high demand.
What affects the Cap Rate value?
Rental fluctuations, property maintenance, occupancy rates, and real estate market conditions directly impact the result.