See the unleveraged yield on any rental or commercial property and compare it to current market benchmarks in seconds.
Use this free cap rate calculator to figure out whether a property is priced right — by stripping out the mortgage, surfacing the real net operating income, and showing you how the deal stacks up against 2026 cap rates for that asset class.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
The unleveraged annual yield on a property.
Cap rate is net operating income divided by property value. It tells you what return the property would generate if you bought it in all cash — independent of your mortgage, tax bracket, or hold period.
5–7% for residential, 5–9% for commercial.
Multifamily typically trades at 4.5–6.5%, industrial at 5–7%, retail at 6–8%, and office at 6–9%. Single-family rentals in most US markets sit between 5% and 8%. Higher isn’t always better — it usually signals more risk.
No. Cap rate is unleveraged on purpose.
The mortgage payment is excluded from the formula. That’s a feature, not a bug — it lets you compare two properties on equal footing, then layer financing on top separately using cash-on-cash return.
Use the one that matches the question you’re asking.
Use purchase price when evaluating a deal you’re buying. Use current market value when measuring the yield on a property you already own — your effective cap rate drops as the value rises.
The mechanics in short answers — no jargon, no upsell.
Take the rent you’d collect if every unit were full all year, add other income (parking, laundry, fees), then subtract a realistic vacancy allowance. That number — not the asking-rent fantasy — is what your NOI is built on.
Taxes, insurance, management, repairs, utilities, vacancy. All in. The mortgage stays out, because cap rate is meant to be financing-agnostic. So does depreciation, since it isn’t real cash.
That’s your cap rate. A $32K NOI on a $500K property is 6.4%. Same NOI on a $640K property is 5.0%. The lower the cap rate, the more buyers are paying per dollar of income.
A 5% cap is a steal on Class A multifamily and a disaster on a Class C retail strip. The benchmark depends on asset class, market tier, and condition — which is why the calculator surfaces the right range automatically.
Designed so anyone can model their situation in under a minute, with or without a finance background.
Plug in three numbers and know whether a property is worth a second look or a hard pass.
A single-family rental and a strip mall finally become comparable when you reduce both to a cap rate.
When your computed cap rate is meaningfully above the market benchmark, you’ve either found a deal or missed an expense. Both worth knowing.
Know the market cap rate, plug in NOI, and you get the price a buyer should pay. Useful for offers and seller pushback.
Every $1,000 you cut from expenses lifts NOI by $1,000 — and at a 6% cap, lifts the property’s value by ~$16,700.
Cap rate is the lingua franca of commercial real estate. Knowing yours, and the market’s, ends a lot of bad negotiations early.
Everything you might ask before, during, or after using this tool.
No. A higher cap rate usually means higher risk — older buildings, tougher neighborhoods, shorter leases, or weaker tenants. A 10% cap rate on a Class C property in a declining market can produce worse realised returns than a 5% cap on Class A in a growth market. Cap rate is a starting point, not the verdict.
Cap rate ignores your mortgage; cash-on-cash includes it. Cap rate measures the property’s yield. Cash-on-cash measures the yield on the cash you actually put in. The same 6% cap rate property can deliver 12%+ cash-on-cash with smart financing — or barely break even with bad terms.
Yes, always. Treating gross rent as if every unit were occupied 365 days a year is the single most common underwriting mistake. Standard practice is to deduct a 5–10% vacancy allowance from gross income before computing NOI.
Because cap rate is meant to compare properties, not financing structures. Two buyers can look at the same building and put very different debt on it — but the property’s underlying yield is identical. Strip out the mortgage and you can talk about the asset on its own terms.
Yes, but with caveats. Single-family values are driven more by comparable sales than by cap rate, so the metric is less load-bearing than in commercial. Still useful for screening — just don’t expect a single-family deal to be priced strictly off cap rate the way a 50-unit apartment building is.
Cap rates tend to follow interest rates upward, with a lag. When the 10-year treasury rises, buyers demand higher yields to justify the same risk, which pushes cap rates up and property values down. Cap rate compression (rates falling) is what most investors hope to ride.
Use trailing 12-month NOI for what you’re actually buying today. Use stabilised or projected NOI when modeling a value-add play. Sellers almost always quote a projected number. Verify it — projected NOI is where 90% of bad deals hide.
No. Combine it with cash-on-cash return, debt service coverage ratio, internal rate of return, and a hard look at the rent roll. Cap rate tells you how the property is priced relative to the market; the other metrics tell you what it’ll actually do for you.
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The cap rate is only as honest as the NOI underneath it. And NOI is where seller pitch decks quietly inflate.
Start with effective gross income — gross rent minus a realistic vacancy allowance, plus any other income. Then subtract every recurring operating expense: taxes, insurance, management (even if you manage yourself — your time has a price), repairs, utilities, HOA, landscaping, pest, advertising.
Do not subtract: mortgage payments, depreciation, capital expenditures (a new roof is not an OpEx), income tax. These belong in other models — not in NOI.
If you want a quick sanity check, expense ratios usually run 30–50% of effective gross income for residential and 25–40% for commercial. Anything dramatically below those bands is probably missing line items.
It depends on three things: asset class, market tier, and condition.
Roughly speaking, 2026 benchmarks look like this. Multifamily 4.5–6.5%. Industrial 5–7%. Self-storage 5.5–7.5%. Retail 6–8%. Office 6–9%. Hotels 7–9%+. Single-family rentals in most US markets sit between 5% and 8%, with a wide spread.
Inside each class, primary markets (NYC, LA, SF, Boston) trade at lower cap rates because investors will accept a thinner yield in exchange for stability and growth. Tertiary markets trade at higher cap rates because the same building carries more risk. A 5.5% cap on Class B multifamily in Austin is a different animal from a 5.5% cap on Class B multifamily in Cleveland.
Three metrics, three different questions.
Cap rate answers: how is this property priced relative to others? It strips out financing so you can compare across deals on equal terms.
Cash-on-cash answers: what return am I getting on the cash I actually put in? It includes the mortgage. Smart financing on a modest cap rate often beats all-cash on a high one.
IRR answers: what’s my total return over the hold, including appreciation and exit? It needs assumptions about rent growth, exit cap rate, and hold period — which means it can be massaged. Cap rate is harder to fake.
Use all three. Cap rate to screen. Cash-on-cash to size your equity. IRR to think about the whole hold.
Cap rates move with the cost of capital. When the 10-year treasury falls, buyers can accept lower yields and still hit their return hurdles — cap rates compress, prices rise. When rates rise, the opposite happens.
Cap rates also move with sentiment. In hot markets, buyers stretch and accept thinner yields on the bet that rents will catch up. In recessions, even strong properties trade wider because nobody wants to be the buyer.
If you’re holding, cap rate compression is the wind at your back. If you’re buying, it’s the wind in your face. Knowing where you are in the cycle matters at least as much as the spreadsheet.
Two short notes worth reading before you trust any number on this page.
Your loan amount, rate, and prepayment inputs never leave your device. No accounts, no cookies on your numbers, no analytics on the values you type. Disconnect from the internet and it still works.
We are not a bank, NBFC, advisor, broker, or distributor of any financial product. The numbers shown here are estimates for educational purposes only, based on the inputs you provide.
Results are not financial, legal, or tax advice. Please consult a qualified professional before any decision about your loan, investments, or personal finances. Actual loan terms and charges depend on your bank and individual circumstances.