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Capitalization Rate illustration

Real Estate · Valuation

Capitalization Rate

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Use cap rate to compare income yield across properties before financing effects.

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Market value yield

Net Operating Income / Property Value

A $50,000 NOI on a $1,000,000 value implies a 5% cap rate.

Check your inputs before you rely on the result — calculations are informational only and depend entirely on the numbers you enter. See our Terms.

Variables and units

  • Net Operating Income

    Income after operating expenses.

    currency

  • Property Value

    Current or estimated property value.

    currency

Common mistakes

  • Including mortgage payments in NOI.
  • Mixing monthly income with annual value assumptions.

Step-by-step example

Market value yield

A $50,000 NOI on a $1,000,000 value implies a 5% cap rate.