Cap Rate Calculator

Our cap rate calculator simplifies the process of evaluating real estate investments. Here's how to use it:

Cap Rate = (Net Operating Income / Purchase Price) × 100%

1. Enter your property's purchase price or current market value.

2. Input the monthly rental income you receive or expect to receive.

3. Add all operating expenses, either on a monthly or annual basis using the toggle feature.

4. Our calculator automatically processes these inputs to compute your property's cap rate, providing an instant snapshot of its investment potential.

A "good" cap rate varies by market and investment strategy, but generally:

• 5% to 10% is considered favorable for most rental properties
• 3% to 5% is typical for lower-risk, stable investments in prime locations
• 10%+ may indicate higher-risk opportunities or undervalued properties

Use our cap rate calculator to compare your property against these benchmarks and make informed investment decisions.

Our cap rate calculator provides precise calculations based on the data you enter. However, its accuracy depends on:

• The accuracy of your input values for purchase price, rental income, and expenses
• Whether you include all relevant operating expenses
• Market conditions, which can affect property value and rental income

For a comprehensive investment analysis, use this calculator as a starting point and consider other factors like property appreciation and financing costs.

While both measure investment profitability, they focus on different aspects:

• Cap Rate: Measures the property's potential return based on income, ignoring financing and leverage. It's calculated as (Net Operating Income / Purchase Price) × 100%.
• ROI (Return on Investment): Considers the total return on your actual investment, including financing, taxes, and appreciation. It's calculated as (Total Profit / Total Investment) × 100%.

Use our cap rate calculator to assess a property's baseline profitability, and complement it with ROI calculations for a complete financial picture.

Absolutely! Our cap rate calculator works for all types of income-generating properties, including:

• Residential rental properties
• Commercial buildings
• Multi-family units
• Industrial properties
• Retail spaces

Simply input the property's purchase price, rental income, and operating expenses to get an accurate cap rate calculation for your commercial real estate investment.

Location significantly impacts cap rates due to market dynamics:

• High-Demand Areas (e.g., major cities): Tend to have lower cap rates (3-5%) because properties are more expensive relative to their income.
• Up-and-Coming Areas: Often offer higher cap rates (6-10%) as properties are more affordable, but may carry higher risk.
• Less Desirable Areas: May have very high cap rates (>10%), but also higher vacancy rates and maintenance costs.

Use our cap rate calculator to compare properties across different locations and find the best investment fit for your strategy.