Cap rate calculator
Enter net operating income and price to get the capitalization rate instantly, with context on whether the deal looks cheap or expensive.
Free, no account. Runs in your browser; your numbers are never sent to a server.
Cap rate check
What it measures
The cap rate (capitalization rate) is the industry standard for valuation. It is essentially the net initial yield, viewed as a measure of risk: a lower cap rate means lower risk and a higher price. This tool checks whether the price you are paying implies a cap rate in line with the market.
When to use it
Use this to sanity-check an asking price. If the seller wants $2M and the market cap rate is 6%, this tells you whether $2M is realistic.
Watch out for
Cap rates vary wildly by location and asset class. A 4% cap is normal for a prime NYC apartment but terrible for a rural warehouse.
Cap rate check
Compare the cap rate you are paying with the market rate.
How it works
Cap Rate = Net Operating Income / Purchase PriceThe capitalization rate strips financing out of the picture and asks: if you bought this building outright in cash, what annual return would its net operating income deliver? Because it's a pure property metric, it lets you compare buildings of different sizes, prices, and loan structures on one axis. It also works in reverse: divide NOI by the market cap rate for that asset class and you get an implied value, which is how professionals sanity-check asking prices.
Worked example
A building producing €50,000 of NOI listed at €1,000,000 offers a 5% cap rate. If comparable buildings in the area trade at 6%, the implied value is €50,000 ÷ 0.06 ≈ €833,000, so the asking price is roughly 20% above the market. Alternatively, holding price constant, you'd need about €60,000 of NOI to justify it. One percentage point of cap rate moves value by six figures here, which is why small assumptions deserve big scrutiny.
Common questions
What is a cap rate?
The capitalization rate is a property's net operating income divided by its price. A building generating €50,000 NOI priced at €1,000,000 has a 5% cap rate: the unleveraged annual return you'd earn buying it in cash.
What is a good cap rate?
It varies by market and risk: prime city-center assets often trade at 4-5%, while secondary locations or riskier tenants push 7-10%. A high cap rate is compensation for risk, not free return.
What's the difference between cap rate and cash-on-cash return?
Cap rate ignores financing; it's the property's own yield. Cash-on-cash measures the return on the equity you personally invested after debt payments, so it changes with your loan terms.
Last reviewed July 2026