What's a good cap rate?

It varies by market and asset class, but 4-10% is a common range — lower cap rates often mean lower risk/higher-demand markets, higher cap rates often mean higher risk or lower-demand markets.

Does cap rate account for financing?

No, cap rate is calculated independent of any mortgage or financing, which makes it useful for comparing properties regardless of how each buyer finances the purchase.

Cap Rate Calculator

The capitalization rate (cap rate) measures a rental property's annual return based on its net operating income relative to its purchase price or current market value, independent of financing. It's a quick way to compare income-producing properties.

Inputs

Results

Cap Rate: 6%
Net Operating Income: $30,000.00

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Formula

Cap Rate = (Net Operating Income / Property Value) × 100

Learn How This Works

Real Estate Investment Metrics: Cap Rate, NOI, DSCR, and Commissions

How cap rate, net operating income, DSCR, and real estate commission splits work together to evaluate an income property deal.

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