Cap Rate Calculator

Cap rate (capitalization rate) is the ratio of a property's Net Operating Income to its purchase price. It measures the return you'd earn if you bought the property with all cash — no mortgage. It's the standard metric for comparing properties regardless of financing.

Most investors consider 5–10% a good cap rate, but it depends on market and risk tolerance. Higher cap rates (8–12%) often mean higher risk or less desirable locations. Lower cap rates (3–5%) are typical in expensive, stable markets with strong appreciation.

Cap Rate = Net Operating Income (NOI) ÷ Purchase Price × 100. NOI is your gross rental income minus operating expenses (taxes, insurance, maintenance, vacancy, management) — but excludes mortgage payments.

Cap rate measures the property's intrinsic return independent of how you finance it. This makes it possible to compare properties on an apples-to-apples basis regardless of down payment, interest rate, or loan terms.

Cap rate ignores financing — it's NOI ÷ property value. Cash-on-cash return includes your mortgage and measures actual cash flow divided by the cash you invested.

GRM = Property Price ÷ Annual Gross Rent. It's a quick screening tool — lower GRM means faster payback. Typically ranges from 4–12 depending on market.