CAP Rate Calculator

CAP Rate Calculator  | Free Real Estate Investment ROI Estimator

A CAP Rate Calculator helps property investors quickly estimate the potential return on investment for real estate properties. The capitalization rate, or cap rate, measures how much income a property generates relative to its current market value or purchase price, giving a clear snapshot of potential ROI without considering mortgage financing. It’s one of the most essential tools in real estate investing, helping buyers and sellers assess profitability, value, and risk before making decisions.​

The cap rate is calculated by dividing the property’s Net Operating Income (NOI) by its current market value. In formula form: Cap Rate = NOI ÷ Property Value. The NOI is the property’s annual income after subtracting all operating expenses such as property taxes, insurance, maintenance, and management fees. For example, if a property generates $35,000 in NOI and is valued at $500,000, its cap rate would be 7%. This percentage represents how much of a return you’d earn annually if you purchased the property outright with cash.​

A CAP Rate Calculator simplifies this process by allowing users to quickly input numbers and get instant results. A higher cap rate often signals greater potential returns with higher associated risks, while a lower cap rate typically means lower returns but more stability. The tool is ideal for comparing multiple properties or evaluating investment scenarios across different markets. By using actual NOI and accurate property valuations, the calculator provides investors with a realistic perspective on income potential and market performance.

What is a Cap Rate?

A capitalization rate, or cap rate, is a key metric used by real estate investors to evaluate the profitability of an income-producing property. It represents the annual return on investment based on the property’s net operating income (NOI) and its market value. Our Cap Rate Calculator simplifies this calculation, helping you make informed investment decisions.

How Does Our Cap Rate Calculator Work?

Our Cap Rate Calculator is user-friendly and delivers instant results. Just input two key figures:

• Net Operating Income (NOI): The property’s annual income after operating expenses (e.g., $50,000).

• Property Value or Purchase Price: The current market value or cost of the property (e.g., $500,000).

The calculator applies the cap rate formula:
Cap Rate = (NOI ÷ Property Value) × 100

For example, a property with an NOI of $50,000 and a value of $500,000 has a cap rate of 10%. This means a 10% annual return, assuming no financing.

Looking for a CAP rate calculator to assess the profitability of a real estate venture? The capitalization rate (CAP rate) is a critical metric for investors, offering a snapshot of a property’s return potential without factoring in financing. In 2025, with commercial and rental markets shifting due to rising interest rates and regional demand, CAP rates typically range from 4-8% for rentals and 5-10% for commercial properties. This guide covers the CAP rate calculator real estate, rental property, with mortgage, Canada, and more, including the CAP rate calculator formula and tools like Excel or simple online apps. Whether you’re eyeing a duplex in Toronto or a retail strip in California, use these insights to make informed investment decisions.

What Is a CAP Rate and Why Use a Calculator?

The CAP rate measures a property’s annual net operating income (NOI) as a percentage of its market value or purchase price, reflecting its yield before financing. It’s a go-to for comparing properties—lower CAP rates signal pricier, stable markets (e.g., urban cores); higher ones indicate riskier, higher-return opportunities (e.g., emerging areas).

A CAP rate calculator simplifies this by inputting income, expenses, and property value to compute the rate instantly. It’s ideal for:

• Evaluating rental CAP rate calculator for multifamily or single-family homes.
• Assessing commercial real estate CAP rate calculator for offices or retail.
• Quick checks via easy CAP rate calculator apps or Excel.

Pro tip: Aim for CAP rates 2% above mortgage rates for positive leverage in 2025.

CAP Rate Calculator Formula: The Basics

The core CAP rate calculator formula is straightforward:

CAP Rate (%) = (Net Operating Income / Property Value) × 100

Where:

• NOI = Annual Gross Income – Operating Expenses (e.g., taxes, maintenance, insurance, not mortgage).
• Property Value = Purchase price or current market value.

Example: A rental property generates $50,000 in annual rent, with $15,000 expenses (NOI = $35,000). If valued at $500,000:

CAP Rate = ($35,000 / $500,000) × 100 = 7%

Reverse CAP Rate Calculator

To find property value: Value = NOI / CAP Rate. E.g., $35,000 NOI at 6% CAP = $583,333 value.

CAP Rate Calculator With Mortgage: Considerations

A standard CAP rate calculator with mortgage excludes financing, as CAP rate is pre-debt. However, you can adjust by:

1. Calculating NOI as usual.
2. Comparing CAP rate to loan interest rate—e.g., 7% CAP vs. 5% mortgage signals positive cash flow.
3. Using Excel to factor debt service post-CAP for cash-on-cash return (Cash Flow / Equity Invested).

Pro tip: If factoring mortgage, ensure CAP rate exceeds loan rate by 1-2% to cover risks.

CAP Rate Ranges

CAP rates vary by market and property type, influenced by interest rates (6-7% in 2025) and demand.

CAP Rate Calculator for Specific Scenarios

Tailored approaches for different needs in 2025.

Rental Property

Use a rental CAP rate calculator for residential investments:

• Input monthly rent × 12, minus expenses (property management ~8-10%, taxes, insurance).
• E.g., $2,000/month ($24,000/year) – $7,000 expenses = $17,000 NOI. At $300,000 value, CAP = 5.67%.

Commercial Real Estate

A CAP rate calculator commercial real estate accounts for higher expenses (e.g., 30-50% of income). A $1M office with $80,000 NOI yields 8%—strong for 2025.

Canada

CAP rate calculator Canada: Urban markets like Vancouver (3-5%) are pricier than Calgary (6-8%). Adjust for Canadian property taxes (e.g., 1-2% of value) and vacancy rates (2-5%).

Excel-Based Calculations

A CAP rate calculator Excel template:

1. Column A: Income (rent, fees).
2. Column B: Expenses (taxes, repairs).
3. Cell C1: =SUM(A) – SUM(B) for NOI.
4. Cell C2: =C1 / Property Value × 100.

Shareable for team analysis or investor pitches.

FAQs

What Is a Good CAP Rate for Real Estate?

In 2025, 5-8% is solid for rentals, 6-10% for commercial. Aim 2% above mortgage rates for positive returns.

How Do You Calculate CAP Rate for Rental Property?

NOI (rent – expenses) ÷ Property Value × 100. E.g., $20,000 NOI ÷ $400,000 = 5% CAP.

Can CAP Rate Include Mortgage Costs?

No—CAP rate excludes financing for universal comparison. Use cash-on-cash for mortgage impacts.

What’s a Normal CAP Rate in Canada?

Ranges 3-8%: 3-5% in urban hubs (Vancouver), 5-8% in secondary markets (Calgary).

Why Use a Reverse CAP Rate Calculator?

To estimate property value from desired NOI and market CAP—e.g., $50,000 NOI at 7% = $714,286 value.

How Does Property Type Affect CAP Rate?

Stables like multifamily yield lower (4-6%); riskier retail or offices hit 7-10% in 2025.

What Expenses Should I Include in NOI?

Taxes, insurance, maintenance, property management—exclude mortgage or capital expenditures.