Know the yield, before you buy.
Calculate the capitalization rate of any investment property and benchmark it against the market in seconds.
Why do real estate investors care about the Capitalization Rate (Cap Rate)?
Because it is the most efficient way to compare the inherent value and yield of different investment properties.
By representing the annual return you would earn if you purchased the property with all cash, the Cap Rate strips away the influence of debt. It allows investors to quickly benchmark a property's performance against similar assets in the same market, ensuring you can identify whether a deal is priced appropriately.
Calculator · Cap Rate Analysis
Capitalization rate
Enter your property details to calculate the cap rate and benchmark it against the market.
Step 1 of 3 — Build Your NOI
Capitalization rate
Enter property income and expense details. NOI is calculated automatically, then used to determine the Cap Rate.
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Total acquisition cost or current market value.
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Average cap rate for comparable properties in this market.
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The total annual income generated from all leases combined.
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Results · Live
Cap Rate Analysis
Yield, market comparison, and investment insight.
Awaiting your figures
Enter property details and required fields to see your Cap Rate analysis.
Capitalization Rate (Cap Rate)
0.00%
vs Market
Residential
Cap Rate
0.00%
Property TypeResidential
Potential Rent Income$0
Vacancy & Credit Loss−$0
Effective Gross Income$0
Other Income$0
Gross Operating Income$0
Operating Expenses−$0
Net Operating Income (NOI)$0
Purchase Price$0
Market Cap RateNot provided
Difference from Market—
Capitalization Rate (Cap Rate)0.00%
—
Capitalization Rate (Cap Rate)
Why do real estate investors care about the Capitalization Rate (Cap Rate)?
Because it is the most efficient way to compare the inherent value and yield of different investment properties.
By representing the annual return you would earn if you purchased the property with all cash, the Cap Rate strips away the influence of debt. It allows investors to quickly benchmark a property's performance against similar assets in the same market, ensuring you can identify whether a deal is priced appropriately.
Formula
Capitalization Rate
Cap Rate=
Net Operating Income
Purchase Price
× 100
Step-by-Step Example
Commercial office building using sample annual figures.
Step 1
Net Operating Income (NOI)
$180,000
NOI is calculated in four sub-steps before arriving at the Cap Rate.
- Potential Rent Income$300,000
- Less Vacancy (5% of $300,000)($15,000)
- Effective Gross Income$285,000
- Plus Other Income ($5,000 + $5,000 + $2,000 + $2,000 + $1,000)$15,000
- Gross Operating Income$300,000
- Property Taxes($40,000)
- Insurance Premiums($15,000)
- Property Management Fees($12,000)
- Maintenance and Repairs($18,000)
- Common Area Maintenance($15,000)
- Payroll Expenses($5,000)
- Administrative Expenses($5,000)
- Replacement Reserves($10,000)
- Net Operating Income (NOI)$180,000
Step 2
Purchase Price
$2,500,000
The total acquisition cost or current market value of the property.
Step 3
Apply the Formula
7.20%
Cap Rate = ($180,000 ÷ $2,500,000) × 100 = 7.20%
Final Result
Cap Rate = ($180,000 ÷ $2,500,000) × 100
= 7.2%
This 7.2% represents the unleveraged annual yield of your investment. This is exactly how smart investors confidently compare assets, bypass the complications of financing, and scale their portfolios with peace of mind.
© Annie Scott Realty Group LLC
Estimates only · not financial advice
