Cap Rate Calculator

Investor's benchmark. Calculate the capitalization rate to compare the profitability and risk level of different real estate investments.

Include taxes, insurance, repairs, and management fees.
Capitalization Rate
9.0%

Annual NOI: $45,000

Monthly Net Cash
$3,750
Expense Ratio
25%

What is a "Good" Cap Rate?

I genuinely believe that the "perfect" cap rate depends entirely on your goals. A high cap rate (8-12%) often means higher potential income but comes with higher risk, such as being in a declining neighborhood or an older building. A low cap rate (3-5%) usually means a stable, premium asset in a "blue-chip" location.

The Formula: Cap Rate = (Net Operating Income / Purchase Price) x 100. Note that NOI does not include your mortgage payments (debt service). The cap rate tells you how the property would perform if you paid all cash.

What to Include in Expenses:

  • Property Taxes: Usually the largest expense.
  • Insurance: Liability and hazard coverage.
  • Maintenance: Capex reserves for roofs, HVAC, and regular repairs.
  • Property Management: Usually 8-10% of gross rent, even if you manage it yourself (value your time!).