Financial Calculators

Calculate Your Property's Cap Rate

Easily determine the capitalization rate of your investment property.

Cap Rate Calculator

Table of contents

◦Cap Rate Calculator
◦Formula
◦How to use
◦FAQ

Cap Rate Calculator

The Cap Rate Calculator helps real estate investors determine the capitalization rate of their properties. This metric is crucial for assessing the potential return on investment and comparing different properties. By inputting the gross income, operating expenses, vacancy rate, and property value, users can quickly calculate the cap rate, which is expressed as a percentage.

This calculator is particularly useful for investors looking to evaluate the profitability of rental properties. A higher cap rate generally indicates a better return on investment, while a lower cap rate may suggest a less favorable investment opportunity. Understanding the cap rate can assist in making informed decisions in the real estate market.

Formula

The formula for calculating the capitalization rate is based on net income and property value. The net income is calculated by subtracting operating expenses from gross income and adjusting for vacancy rates. The cap rate is then determined by dividing the net income by the property value and multiplying by 100 to express it as a percentage.

How to use

  1. Enter the gross income generated by the property.
  2. Input the total operating expenses in dollar amounts.
  3. Specify the vacancy rate as a percentage.
  4. Provide the property value to calculate the cap rate.

FAQ

What is a good cap rate?

A good cap rate typically ranges between 8% to 12%, but this can vary based on location and property type.

How do I interpret the cap rate?

A higher cap rate indicates a potentially better return on investment, while a lower cap rate may suggest a less favorable investment.

Can I use this calculator for commercial properties?

Yes, this calculator can be used for both residential and commercial properties to assess their capitalization rates.

FORMULA RULES (strict — the formula compiles to a single JS function the page runs):

  • Identifiers on either side MUST exactly match the camelCase names you declared in inputs/outputs.
  • Every output[].name MUST appear on the LEFT side of a "name = expression" line.
  • Use ^ for powers (e.g. (1+r)^n) OR pow(x, y).
  • Allowed math functions: sqrt abs sin cos tan log ln exp pi pow min max round floor ceil sign random.
  • No comments, no "where ..." clauses, no if/else/ternary, no string outputs, no Σ, no subscripts, no arrays, no recursion.
  • Single-step computation only. If conditional logic is needed, use boolean arithmetic: (cond > 0) exprA + (cond <= 0) exprB.
  • The bug context lists what the legacy version got wrong. FIX IT.
  • 2-5 inputs typical; outputs are plain numbers.