Inputs
Tax, insurance, maintenance, management (exclude mortgage)
Results
Cap Rate
5.58%
More details
How to Use
- 1Enter the current market value or purchase price of the property.
- 2Input the monthly gross rent (all units combined for multi-family).
- 3Set your vacancy rate based on the local market (5% is a common assumption).
- 4Enter total annual operating expenses excluding mortgage payments.
- 5Compare your cap rate to local market cap rates for similar properties.
Frequently Asked Questions
What is cap rate used for?+
Cap rate measures the income return of a property independent of financing. It's used to compare properties, price acquisitions, and evaluate if the return justifies the risk. A higher cap rate means more income per dollar of value.
What is a good cap rate?+
Good cap rates vary by market. Class A properties in major metros often trade at 4–5%. Secondary markets may see 6–8%. Value-add or higher-risk properties may be 8–10%+. Always compare to local comps.
Why does cap rate exclude mortgage?+
Cap rate is a property-level metric that measures asset performance regardless of how it's financed. This lets you compare properties financed differently or all-cash deals on equal footing.
What is the relationship between cap rate and value?+
As cap rates compress (go down), property values rise. As cap rates expand (go up), values fall. Commercial properties are often valued as NOI ÷ Market Cap Rate. A 1% cap rate change can move values 15–20%.
How is cap rate different from cash-on-cash return?+
Cap rate ignores financing and is based on property value. Cash-on-cash return accounts for mortgage payments and measures return on your actual cash invested. Both metrics together give a complete picture.
This calculator is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified professional before making real estate or financial decisions.