Cap rate reveals financing-agnostic property yield
For real estate investors using the industry standard: NOI divided by purchase price to compare properties independently of how they're financed.
Cap Rate Calculator
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Create Free AccountWhat it does
The Cap Rate Calculator divides a property's net operating income by its purchase price to produce an annualized yield percentage that is completely independent of financing. This makes it the most widely-used metric for comparing properties across different markets, price points, and financing structures.
Unlike cash-on-cash return — which measures your leveraged return on invested cash — cap rate measures the property's intrinsic income-generating power. A cap rate of 6% means the property returns 6 cents of NOI for every dollar of value, regardless of how much you borrowed to buy it.
Who it's for
- Buy-and-hold investors screening deals quickly before spending time on full underwriting
- Portfolio investors benchmarking performance across different properties and markets
- Syndicators and commercial investors evaluating acquisition pricing
- Agents and brokers presenting investment analysis to investor clients
How it works
Calculate NOI
Gross rental income − operating expenses (excluding debt service).
Input purchase price
Total acquisition cost.
Divide
NOI ÷ purchase price = cap rate.
Why it matters
Compare deals across different financing scenarios
Identify market cap rate trends and value shifts
Judge whether a property's price is justified
Use same metric as commercial lenders and appraisers
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Every investment strategy — rental, flip, BRRRR, mortgage, commercial, wealth building.
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Conservative, base, and optimistic 1/2/5/10-year return modeling.
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Enter a property address to pre-fill value, rent, and tax data automatically.
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Every formula audited against professional underwriting standards.
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Frequently asked questions
What's a good cap rate?
Varies by market and property class. 4–8% is typical for stabilized properties; 8–15%+ for value-add or development.
Why ignore financing in cap rate?
Cap rate is the property's inherent yield, regardless of how you lever it. Two identical properties financed differently have the same cap rate.
How do I use cap rate to compare markets?
If Austin caps at 5% and Memphis caps at 8%, Memphis's market offers higher yields — but potentially lower appreciation. Match to your strategy.
Does cap rate predict future returns?
No — cap rate is static. It shows current yield. Actual returns depend on how long you hold and how much appreciation or rent growth occurs.
Is this calculator free to use?
Yes — create a free Investor Starter account to run 1 calculator per day. No credit card required. Upgrade to Core ($49/mo) for unlimited access to all 67 calculators.
How accurate are the results?
Results are only as accurate as your inputs. The formulas use industry-standard real estate investment math. Always verify with a licensed professional before committing capital.
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