Cap Rate Calculator
Cap rate divides net operating income (rental income minus operating costs) by the purchase price, showing the annual return as if the property were bought in cash with no loan. It is the most common first-pass comparison metric in commercial real estate.
Your numbers
Cap rate
6%
What it means
The cap rate is 6%. A higher-than-average cap rate can mean strong rental yield or added risk.
Formula
Cap rate = Net operating income ÷ Property value × 100
It ignores loan interest, depreciation, and vacancy swings. It is most meaningful comparing similar properties in the same market.
What to enter
| Input | Default | Accepted range |
|---|---|---|
| Net operating incomeRental income minus operating costs, before loan interest. | 60,000,000 | 0 and up |
| Property valueThe purchase price or appraised value. | 1,000,000,000 | 1 and up |
Step by step
Quick reference table
Results when only Net operating income changes and everything else stays put.
| Net operating income | Cap rate (%) |
|---|---|
| 30,000,000 | 3 |
| 45,000,000 | 4.5 |
| 60,000,000 | 6 |
| 90,000,000 | 9 |
| 120,000,000 | 12 |
What each result means
| Result | At default values |
|---|---|
| Cap rate (%)Net operating income divided by value — the all-cash annual return. | 6 |
Common mistakes
It ignores loan interest, depreciation, and vacancy swings. It is most meaningful comparing similar properties in the same market.
Glossary
- Net operating income
- Rental income minus operating costs, before loan interest.
- Property value
- The purchase price or appraised value.
- Cap rate
- Net operating income divided by value — the all-cash annual return.
Frequently asked questions
QHow is Cap Rate Calculator calculated?
Cap rate = Net operating income ÷ Property value × 100 — Cap rate divides net operating income (rental income minus operating costs) by the purchase price, showing the annual return as if the property were bought in cash with no loan. It is the most common first-pass comparison metric in commercial real estate.
QCan you walk through an example?
With Net operating income 60,000,000, Property value 1,000,000,000, the answer is Cap rate 6%.
QWhat do I need to enter?
Enter Net operating income, Property value. The result recalculates as you type, and an empty box counts as zero.
QHow much does the answer move if I change a number?
Changing only Net operating income moves the answer to Net operating income 30,000,000 → Cap rate (%) 3 and Net operating income 120,000,000 → Cap rate (%) 12. The table below lays out five steps.
QHow are the numbers rounded?
Money is shown to the nearest whole unit, percentages to one decimal place and everything else to two. What you see is rounded; the calculation itself carries the unrounded value forward.
QAnything to watch out for?
It ignores loan interest, depreciation, and vacancy swings. It is most meaningful comparing similar properties in the same market.
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