What is a good cap rate?

A good capitalization rate typically ranges between 5% and 10%, depending on property asset class, location, and market risk. Lower cap rates indicate lower risk and higher asset value, while higher cap rates indicate higher risk and potential return.

Does cap rate include mortgage payments?

No. Cap rate measures unleveraged property return and strictly excludes debt service (mortgage principal and interest), allowing investors to compare property earning performance regardless of financing structure.

Cap Rate Calculator - Property Valuation

Solve for cap rate, property value, or net operating income (NOI). Free capitalization rate calculator for commercial real estate investors and brokers.

Commercial Real Estate Capitalization Rate & Asset Valuation

Using an institutional-grade cap rate calculator allows real estate investors, appraisers, and commercial brokers to evaluate unleveraged property yields and estimate current market values. The commercial real estate capitalization rate represents the ratio between an asset's annual net earnings and its purchase price, serving as the benchmark metric for comparing unleveraged performance across property sectors.

How to Calculate Net Operating Income and Implied Property Value

To accurately determine market value or capitalization rate, investors must first calculate net operating income by subtracting all routine operating expenses—such as property taxes, insurance, management fees, utilities, and maintenance—from effective gross revenue. Dividing annual NOI by your target market cap rate determines the maximum supportable acquisition price for any commercial asset.