Cap Rate Calculator
The capitalization rate is the most quoted number in income-property investing: it measures the unlevered annual return a property produces before financing. Enter your net operating income and property value to get the cap rate instantly — plus the price implied by your target rate.
How cap rate is calculated
Cap rate is based on net operating income (NOI): all rental income minus operating expenses such as property tax, insurance, management and maintenance — but before any mortgage payments.
Benchmarks (US, 2026): single-family rentals commonly trade at 5–8% and small multifamily at 5–9%. A cap rate above 10% usually signals a weaker market or property risk, not a better deal — always compare within the same market and asset class.
Frequently asked questions
What is a good cap rate?
Most US residential investors target 5–8%. Below 5% means you are largely betting on appreciation; above 10% often comes with vacancy, management or neighborhood risk.
Does cap rate include mortgage payments?
No. NOI excludes debt service, which is exactly what makes cap rate comparable across deals with different financing.
Cap rate vs cash-on-cash return — which should I use?
Use cap rate to compare properties on an unlevered basis, and cash-on-cash to see the return on your actual cash after financing. Our comparison page breaks down the difference.
Related tools
- Formula: standard income-property valuation (NOI ÷ value). Benchmark ranges: aggregated US market observation, 2026.
Last updated: 2026-09-08