Finance & Money
Cap Rate Calculator - Calculate cap rate based on income and expenses.
Calculate cap rate based on income and expenses.
Formulas and edge cases are reviewed against authoritative references before publication. For methodology, editorial standards, or corrections, use the links below.
Frequently asked questions
What is cap rate?
Capitalization rate measures a property's potential return if purchased with all cash - NOI divided by property value.
Does cap rate include mortgage?
No, cap rate uses NOI before debt service. It shows unlevered return.
Higher or lower cap rate better?
Lower cap rates indicate lower risk/return (prime locations). Higher indicates more risk but potentially better returns.
Related tools
About this tool
Inputs
- Property Value
- Annual Gross Income
- Operating Expenses
Results
- Cap Rate
- Net Operating Income
- Gross Rent Multiplier
Before making a decision based on estimates, run the numbers through this Cap Rate Calculator. A few seconds of input can save hours of uncertainty. Small changes in interest rates or time horizons can dramatically shift outcomes. Enter property value, annual gross income and operating expenses. The tool processes your data and returns cap rate, net operating income and gross rent multiplier. From students to professionals, anyone who needs to calculate cap rate based on income and expenses benefits from getting an instant, verifiable answer.
Lower cap rates indicate lower risk/return (prime locations). Higher indicates more risk but potentially better returns. The underlying math typically involves compound growth: FV = PV × (1 + r/n)^(n×t). Always compare at least two scenarios — optimistic and conservative — to bracket your expectations. Understanding the time value of money is essential for sound financial planning. Change one variable while holding the others constant to isolate its impact. This sensitivity check is often more informative than a single result.