→ Free tool
Cap Rate Calculator
The fastest way to compare one property against another. Enter the income, operating expenses, and price to get the capitalization rate and net operating income — the two numbers real-estate investors reach for before anything else.
Start from a template
→ Your cap rate
A 6.5% cap rate
Cap rate is the unleveraged yield — the return if you paid all cash. Prime properties in strong markets trade at low cap rates (4–6%); higher cap rates (8%+) usually mean more income relative to price, but also more risk or a weaker location. A higher cap rate isn't automatically "better" — it's the market pricing risk.
Compare scenarios
Save the current inputs as a scenario, then compare best, base, and worst side by side. Saved in this browser.
Add this calculator to your website
Free to embed. Copy the code below — it includes a link back to Planypals.
<iframe src="https://planypals.com/embed/cap-rate-calculator" title="Cap Rate Calculator" width="100%" height="760" loading="lazy" style="border:1px solid #ddd3bf;max-width:760px"></iframe> <p style="font:13px/1.5 sans-serif">Free <a href="https://planypals.com/tools/cap-rate-calculator">Cap Rate Calculator by Planypals</a></p>
Download these results as a PDF report
Get a clean PDF of the cap rate and NOI — handy for a deal analysis or a real-estate plan.
No spam. We'll send occasional founder resources and you can unsubscribe anytime.
Calculations run entirely in your browser. Figures are estimates for planning, not financial advice.
What the cap rate tells you
The capitalization rate is a property's unleveraged yield — the annual return you'd earn if you bought it in cash. Because it strips out financing, it lets you line up a suburban duplex next to a downtown office building and compare them on the same terms. Investors use it three ways: to gauge a property's return, to estimate value (divide NOI by a market cap rate), and to read risk — a low cap rate signals a safe, sought-after asset, a high one signals income that comes with strings attached.
The formula, worked through
- NOI = gross income − operating expenses (excluding the mortgage)
- Cap rate = NOI ÷ property value
- Implied value = NOI ÷ target cap rate
Take a property renting for $120,000 a year with $42,000 of operating expenses: NOI is $78,000. At a $1.2Mprice, that's a 6.5% cap rate. Flip it around — if comparable buildings trade at a 6% cap, that same $78,000 of NOI implies a value near $1.3M, which is how appraisers and investors price income property.
Why a higher cap rate isn't always better
It's tempting to chase the highest cap rate, but the number is a trade-off, not a scoreboard. A 9% cap in a declining town can be riskier than a 5% cap in a growing metro, because the higher yield is compensation for softer demand, older buildings, or shorter leases. Seasoned buyers weigh cap rate against the market's trajectory, the quality of the tenants, and the capital the building will need — a cheap-looking yield can evaporate after a roof replacement.
Cap rate vs. cash-on-cash return
Cap rate ignores your loan; cash-on-cash return doesn't. Once you finance a purchase, your actual return on the cash you put in depends on the interest rate and terms — which is why two investors can buy the same building at the same cap rate and earn very different returns. Model the financing separately with our commercial real estate loan calculator, and confirm the income covers the debt with the DSCR calculator.
→ Beyond the calculator
Financing or presenting a property deal?
A cap rate opens the conversation; lenders and partners want the full picture. Our real estate business plan writers build the deal analysis, market research, and projections behind the number.
Frequently asked questions
- Cap rate = Net Operating Income ÷ Property Value. NOI is the property's annual gross income minus its operating expenses (taxes, insurance, maintenance, management, and a vacancy allowance), but before the mortgage. A $1.2M property with $78,000 of NOI has a cap rate of 6.5%.
- It depends on the market and the asset. Prime properties in strong metros trade at low cap rates — often 4–6% — because buyers accept a lower yield for safety and appreciation. Higher cap rates (8%+) offer more income per dollar but usually signal more risk, an older asset, or a weaker location. There's no single 'good' number; it's the market pricing risk.
- No. Cap rate is deliberately unleveraged — it measures the property's return as if you paid all cash, so you can compare deals on equal footing regardless of financing. Once you add a loan, your actual return on invested cash (cash-on-cash return) can be higher or lower than the cap rate depending on the terms.
- NOI (net operating income) is a dollar figure — the income a property throws off after operating expenses. Cap rate turns that into a percentage by dividing NOI by price, so you can compare a $300K duplex against a $3M retail center. NOI drives the value; cap rate expresses the yield.
- Yes — it runs in your browser, nothing is stored, and there's no sign-up. When you're financing or presenting a real-estate deal, our real estate business plan writers build the full analysis and projections lenders and partners expect.