Estimate the profitability and return potential of your real estate investment.
Calculated Capitalization Rate
0%
Net Operating Income: $0
What is a Cap Rate?
The Capitalization Rate (Cap Rate) is a fundamental metric used in real estate to indicate the rate of return that is expected to be generated on a real estate investment property. It is calculated based on the net income which the property is expected to generate and is used to estimate the investor's potential return on their investment.
The Cap Rate Formula
To calculate the cap rate, you divide the Net Operating Income (NOI) by the current market value or purchase price of the asset. The formula is expressed as follows:
Cap Rate = (Net Operating Income / Current Market Value) × 100
How to Calculate Cap Rate in 3 Steps
Determine Gross Income: Total all rental income and other revenue generated by the property (laundry, parking, etc.).
Subtract Operating Expenses: Deduct costs like property taxes, insurance, maintenance, and management fees. Do NOT include mortgage payments or depreciation.
Divide by Property Value: Take that Net Operating Income (NOI) and divide it by the property's current value or asking price.
Example Calculation
Metric
Example Data
Annual Rental Income
$100,000
Operating Expenses
$25,000
Net Operating Income (NOI)
$75,000
Property Value
$1,000,000
Cap Rate
7.5%
Why Cap Rate Matters
Cap rates allow investors to compare different real estate opportunities quickly. A higher cap rate usually indicates a higher potential return but often comes with higher risk. Conversely, a lower cap rate might suggest a safer investment in a highly desirable location (like a Tier-1 city).
function calculateCapRate() {
var grossIncome = parseFloat(document.getElementById('grossIncome').value);
var operatingExpenses = parseFloat(document.getElementById('operatingExpenses').value);
var propertyPrice = parseFloat(document.getElementById('propertyPrice').value);
var resultBox = document.getElementById('resultBox');
var capRateDisplay = document.getElementById('capRateDisplay');
var noiDisplay = document.getElementById('noiDisplay');
// Validation
if (isNaN(grossIncome) || isNaN(operatingExpenses) || isNaN(propertyPrice) || propertyPrice <= 0) {
alert("Please enter valid positive numbers for all fields. Property value must be greater than zero.");
return;
}
// Calculation
var noi = grossIncome – operatingExpenses;
var capRate = (noi / propertyPrice) * 100;
// Display results
resultBox.style.display = 'block';
capRateDisplay.innerHTML = capRate.toFixed(2) + "%";
noiDisplay.innerHTML = "Net Operating Income: $" + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Scroll to result
resultBox.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}