Capitalization Rate Calculator

What Is Cap Rate?

Cap Rate = NOI / Property Value × 100. It measures the annual return of a property as if you paid all cash. A $400K property generating $26,000 NOI has a 6.5% cap rate. Higher cap rate = higher return but typically higher risk. Lower cap rate = lower return but usually lower risk (prime locations).

What Is a Good Cap Rate?

4-5%: Class A properties in major cities (low risk, high appreciation). 5-7%: Solid suburban properties (balanced risk/return). 7-10%: Value-add or B/C class properties (higher cash flow, more management). 10%+: High-risk or distressed properties. The "right" cap rate depends on your risk tolerance and investment strategy.