Cap Rate Calculator
Analyze your real estate investment potential
Optional Property Search
Using Zillow's price and rent estimates • Operating expenses set to 35% of annual rent$
$
$
Cap Rate Calculator: Understanding Real Estate Returns
What is a Cap Rate Calculator?
A cap rate calculator is a tool used by real estate investors to determine the capitalization rate of a property. The cap rate measures the potential return on an investment property based on its net operating income (NOI) and purchase price. Understanding cap rates is essential for evaluating whether a property is a good investment.
How to Calculate Cap Rate?
Cap Rate = (Net Operating Income ÷ Purchase Price) × 100
Using a cap rate calculator, investors can quickly determine the profitability of a rental property.
Why Use a Cap Rate Calculator?
Quick and Accurate Calculations
Avoid manual errors by using an automated cap rate calculator
Compare Different Properties
Easily compare multiple investment opportunities
Assess Risk and Profitability
Higher cap rates indicate higher risk but also higher potential returns
Factors Affecting Cap Rate
Property Location
High-demand areas typically have lower cap rates
Market Trends
Economic conditions influence property values and rental income
Operating Expenses
Higher expenses reduce NOI, affecting the cap rate
Property Type
Different types of real estate (residential, commercial, multi-family) have varying cap rates
What is a Good Cap Rate?
4-6%
Common for residential properties in high-demand locations
6-8%
Considered a solid return in many markets
8%+
Higher-risk investments but with greater potential profitability
How to Use a Cap Rate Calculator?
Step 1
Enter the annual rental income
Step 2
Subtract operating expenses to get the NOI
Step 3
Input the property purchase price
Step 4
Click calculate to get the cap rate
Cap Rate vs. ROI
While the cap rate calculator measures profitability before financing, return on investment (ROI) considers mortgage payments and financing costs. Both metrics are valuable for making informed investment decisions.
Conclusion
A cap rate calculator is an essential tool for real estate investors. It provides a clear picture of potential returns, helping investors make informed decisions. Whether you're a seasoned investor or just starting, using a cap rate calculator can improve your investment strategy.
Summary:
A cap rate calculator is the fastest way to evaluate real estate investments. Investors rely on a cap rate calculator to compare different properties and assess profitability. A cap rate calculator helps determine risk levels before purchasing. Using a cap rate calculator ensures smarter investment choices. Every investor should use a cap rate calculator for accurate calculations.
© 2025 Cap Rate Calculator. All rights reserved.