Cap Rate Calculator
Calculate the capitalization rate for any investment property instantly. Enter your NOI and property value — get your cap rate in seconds.
Enter Property Details
Monthly rent × 12
Property tax + insurance + maintenance + management (exclude mortgage)
Cap Rate Formula Explained
Where NOI = Gross Rent − Operating Expenses (before mortgage)
NYC, LA, SF, Boston. Lower risk, higher property values, compressed yields.
Dallas, Atlanta, Phoenix, Nashville. Balance of yield and appreciation.
Smaller cities, rural areas. Higher cash flow but watch for liquidity and vacancy risk.
Cap Rate — Common Questions
What is a cap rate?
Cap rate (capitalization rate) is the ratio of a property's Net Operating Income (NOI) to its current market value, expressed as a percentage. Formula: Cap Rate = NOI ÷ Property Value × 100.
What is a good cap rate for rental property?
A 'good' cap rate depends on the market and property type. In major metros (NYC, LA, SF), 3–5% is common. In secondary markets (Dallas, Atlanta, Phoenix), 5–8% is typical. Above 8% often signals higher risk or a less liquid market.
What is NOI in real estate?
Net Operating Income (NOI) is gross rental income minus all operating expenses (property taxes, insurance, management fees, maintenance, vacancy allowance) — before mortgage payments or depreciation.
Does cap rate include mortgage payments?
No. Cap rate is calculated before debt service. It measures the property's income potential independent of how it's financed. For a leverage-adjusted return, use Cash-on-Cash Return instead.
How is cap rate different from ROI?
Cap rate ignores financing and measures the property's standalone return. ROI (and Cash-on-Cash Return) factors in your down payment and mortgage, giving you the return on your actual invested equity.
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