Cap Rate Calculator
Calculate capitalisation rate from net operating income and price, compare properties on a like-for-like basis, and see the value a target cap rate implies.
Are you a real estate agent or broker? Send this calculator to your buyers on your own branded listing page — every enquiry comes straight to your WhatsApp. Create free agent page →
Capitalisation rate is how property investors compare assets without financing muddying the picture. It divides net operating income — rent after running costs but before any mortgage — by the price. Because it excludes debt, two buyers with different loans still get the same cap rate for the same building.
It is the standard measure in commercial property and increasingly used for residential investment, precisely because gross yield ignores costs and cash-on-cash return depends on how much you borrowed.
The formula
Net operating income = annual rent − annual running costs. Cap rate = NOI ÷ price × 100. Running costs mean management, maintenance, insurance, local property taxes and vacancy — everything except mortgage payments and income tax.
Worked example
A property at 400,000 collecting 28,000 a year with 8,000 of running costs has an NOI of 20,000 and a cap rate of 5%. Gross yield looks better at 7%, which is exactly why gross yield flatters and cap rate does not. If you require a 6% cap rate, the most you should pay is 20,000 ÷ 0.06 = about 333,000.
Reading the number
A higher cap rate means more income per unit of price, but usually also more risk — weaker location, older building, shorter leases. Comparing cap rates only makes sense between genuinely similar assets in similar markets.
Turn a calculation into an enquiry
Buyers who run these numbers are ready to talk. Give every listing its own page with your photo, phone and WhatsApp on it — leads land straight on your phone.
Create your free property pageFrequently asked questions
What is a good cap rate?
It depends entirely on the market and asset type, and there is no universal number. Prime property in expensive cities often trades at 3-4%, while secondary locations may show 7-9% precisely because the risk and management burden are higher.
Why exclude the mortgage?
Because financing is a property of the buyer, not the building. Excluding it means two investors with different loans can compare the same asset on the same basis, which is the whole point of the measure.
How is cap rate different from cash-on-cash return?
Cap rate measures the asset; cash-on-cash measures your position in it. Cash-on-cash divides cash flow after mortgage by the cash you actually put in, so leverage changes it dramatically while cap rate stays the same.
More investing calculators
Landlord cash flow
What a let property leaves after every cost.
InvestingRental yield
Gross, net, and what your own cash actually returns.
InvestingBreak-even rent
The lowest rent that still covers every cost.
InvestingCapital gain
Real profit after every cost, then after tax.
InvestingCash-on-cash return
What your own money earns, not what the building earns.
InvestingGross rent multiplier
The fastest first filter on a rental listing.
InvestingRent-to-price rule
A thirty-second screen on any rental listing.
InvestingDebt service coverage
The ratio lenders use to size an investment loan.
InvestingTotal return
All four ways a rental property makes money, in one number.
InvestingRental stress test
The cover test that decides your buy-to-let loan size.
InvestingCost of a void
What every empty day costs a landlord.
InvestingHoliday let income
What a short-term let earns after every deduction.