Direct answer
How this metric is calculated
Cap rate = annual net operating income (NOI) ÷ property value × 100.
Cap rate analysis
Calculate net operating income and capitalization rate before financing, using your real operating-cost assumptions.
Annual operating costs
Cap rate
6.17%
NOI divided by purchase price. Financing is intentionally excluded from cap rate.
Gross yield
10.00%
NOI / year
$18,520
Monthly cash flow
$1,543
Cash invested
$300,000
Planning estimate only. Tax treatment, financing, future rent, vacancies and operating expenses vary by property and market.
Use it correctly
Compare like-for-like properties
Keep vacancy, management and operating-cost assumptions consistent when comparing properties. A higher headline return can disappear when service charges, maintenance or vacancy are ignored.
Frequently asked questions
Cap Rate Calculator FAQs
What is cap rate in real estate?
Capitalization rate compares a property's annual net operating income with its value or purchase price. It is a property-level metric and does not include mortgage payments.
Does cap rate include financing?
No. Cap rate is intentionally calculated before debt service so investors can compare properties independently of individual financing structures.
Is cap rate the same as ROI?
No. Cap rate measures unlevered operating performance. ROI can include financing, upfront costs, principal repayment and other gains or losses.