Cap Rate

Net operating income as a percentage of property value.

Example Result

Sample Data

5.28%

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

See Your Own Properties

With the Rental Property Calculator™, you can run this calculation against your own rental properties using your real numbers.

View Pricing Sign In

Cap Rate Formula

NOI / Property Value x 100

$20,344 / $385,000 x 100

5.28%

What This Means

A sample property priced at $385,000 with $2,850/month rent has a cap rate of 5.28%. Cap rate is the lingua franca of real estate investing. It lets you compare properties of different sizes, locations, and price points on an apples-to-apples basis. Higher cap rates mean higher relative income but often come with higher risk. Most residential investors target 5-10% cap rates.

Where This Value Comes From

Cap Rate is not entered directly — it is calculated from Net Operating Income and Property Value. See the formula breakdown above and the detailed inputs below.

Calculated From

Cap Rate is calculated using these inputs:

Net Operating Income

Income remaining after all operating expenses but before debt service.

$20,344

Property Value

The current estimated market value of the property.

Found on your county assessor

$385,000

Used to Calculate

Cap Rate is used as an input for these calculations:

Value Based on Cap Rate

Valuation Metrics

$385,000

Platform Distribution

Unlock Platform Benchmarks

See the average, median, and where your property ranks among 105 properties on the platform.

Unlock Rental Property Calculator

Why It Matters

Cap rate is the lingua franca of real estate investing. It lets you compare properties of different sizes, locations, and price points on an apples-to-apples basis. Higher cap rates mean higher relative income but often come with higher risk. Most residential investors target 5-10% cap rates.

Detailed Explanation

The Capitalization Rate (Cap Rate) is perhaps the most widely used metric in commercial real estate. It measures the rate of return on a property based on NOI relative to its current market value, independent of financing. Think of it as the return you would get if you bought the property with all cash.