Cap Rate Calculator

Capitalization rate is the shorthand investors use to size up an income-producing property and stack one opportunity against another. The metric carries extra weight in the 2026 market, where shifting interest rates and property values change what counts as a fair price almost month to month. A clear read on cap rate supports sharper buy-and-sell decisions and shows how a deal measures up against the broader field.

To find the figure, divide Net Operating Income (NOI) by the property's current market value: Cap Rate = NOI / Property Value. NOI is the annual income left after operating expenses are subtracted, but before debt service and income taxes enter the picture. Because the formula strips out financing, it captures the unleveraged yield and makes comparisons across property types far more consistent.

Accuracy hinges on a clean NOI, so keep non-operating items such as mortgage payments and depreciation out of the figure. Treating gross income as NOI is a frequent error that inflates the result and distorts the comparison. A higher cap rate signals a larger potential return, yet it often reflects greater risk as well, which is why the number is best read against the typical range for that property type.