Cap Rate Calculator — Real Estate Capitalisation Rate
Find the cap rate of any investment property — enter the annual net operating income (NOI) and the purchase price to instantly see your yield, gross rent multiplier and where your investment stands versus the market.
Cap rate = NOI ÷ Property value × 100
- 1
NOI ÷ Property value
24,000 ÷ 400,000 = 0.06 - 2
Cap rate
0.06 × 100 = 6Net operating income divided by property value, expressed as a percentage.
How does this calculator work?
Cap rate = annual NOI ÷ property value × 100. A property with €24,000 NOI purchased for €400,000 has a 6 % cap rate. Typical residential cap rates range from 4–8 %; higher values suggest higher yield but also higher risk. Enter NOI and purchase price to assess any rental property instantly.
Formula
How this is calculated
The capitalisation rate is the most widely used metric for comparing investment property yields. It expresses the annual net operating income as a percentage of the property value: cap rate = (NOI / Property Value) × 100. NOI is gross rental income minus all operating expenses (property management, maintenance, insurance, taxes, vacancy allowance) but before any mortgage payments — financing is excluded so different investors with different leverage can compare properties on equal footing.
A low cap rate (below 4 %) typically indicates a desirable, lower-risk market (strong demand, stable cash flows) but means you pay more for each dollar of income. A high cap rate (above 7–8 %) signals higher income relative to price, which often comes with higher risk — inferior location, older assets, or a distressed market. Typical residential markets run 4–6 %, while commercial or value-add properties often target 6–10 %.
The Gross Rent Multiplier (GRM = Property Value / Annual Gross Rent) is a quick filter that ignores expenses; lower is generally better. The NOI margin (NOI / Gross Rent × 100) measures operating efficiency. All figures are indicative estimates — actual returns depend on vacancy, maintenance surprises, financing costs and local market conditions. These values are editable estimates for illustrative purposes.
Frequently asked questions
There is no universal answer — it depends on location, asset class and risk appetite. Residential properties in prime urban markets commonly trade at 3–5 % cap rates, while suburban or regional markets may offer 6–9 %. Higher cap rates imply higher yield but often higher risk or lower appreciation potential.
Cap rate is a property-level metric, not an investor-level metric. By excluding financing (which differs for each buyer), it lets you compare properties and markets on a consistent, leverage-free basis. For your personal return after debt service, calculate the cash-on-cash return instead.
Cap rate uses total property value in the denominator and ignores debt. Cash-on-cash return divides annual pre-tax cash flow (after mortgage payments) by the actual cash invested (down payment plus costs). Cap rate is for property comparison; cash-on-cash measures your personal leveraged return.
TG we-Calculate Editorial Team. (2026). Cap Rate Calculator — Real Estate Capitalisation Rate [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/cap-rate-calculator
TG we-Calculate Editorial Team. "Cap Rate Calculator — Real Estate Capitalisation Rate." TG we-Calculate. 2026. https://we-calculate.com/calculator/cap-rate-calculator.
TG we-Calculate Editorial Team, "Cap Rate Calculator — Real Estate Capitalisation Rate," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/cap-rate-calculator
@misc{wecalculate_cap_rate_calculator, title = {Cap Rate Calculator — Real Estate Capitalisation Rate}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/cap-rate-calculator}}, year = {2026}, note = {TG we-Calculate} }
Did this calculator help you?