Cap Rate Calculator
Calculate the capitalization rate for commercial and apartment properties
Property Details
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NOI = Gross Income - Operating Expenses
Results
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Enter your property details to calculate the cap rate
What is Cap Rate?
The Capitalization Rate (Cap Rate) is one of the most important metrics in commercial real estate investing. It measures the rate of return on a property based on the income it generates.
Formula
Cap Rate = (Net Operating Income ÷ Purchase Price) × 100
How to Interpret Cap Rate
- Higher Cap Rate (8%+): Higher return, but potentially higher risk. Common in Class C properties or less desirable locations.
- Medium Cap Rate (6-8%): Balanced risk/return. Typical for Class B properties in good markets.
- Lower Cap Rate (4-6%): Lower return, but typically lower risk. Common in Class A properties in prime locations.
Factors That Affect Cap Rate
- • Location and market demand
- • Property class and condition
- • Tenant quality and lease terms
- • Local interest rates and financing availability
- • Supply and demand dynamics
- • Economic conditions