Real Estate Cap Rate Calculator
Calculate Net Operating Income (NOI), Capitalization Rate (Cap Rate), and Gross Rent Multiplier (GRM) to assess property return yields independent of financing.
Property Financials
Total scheduled annual rent ($4,000/mo).
Investment Yield Metrics
What is Capitalization Rate (Cap Rate)?
The Capitalization Rate (Cap Rate) is the foundational profitability metric in commercial and residential income real estate. Calculated as Cap Rate = Net Operating Income (NOI) / Property Asset Value, it expresses the expected unlevered annual return if the property were acquired 100% in all-cash, allowing real estate investors to compare opportunities objectively across different markets without mortgage financing distortion.
What is Considered a Good Cap Rate?
3% – 5% (Low Risk / Primary Markets)
NYC, San Francisco, London. Highly stable cash flows, high appreciation potential, lower yield.
6% – 8% (Balanced / Secondary Markets)
Austin, Atlanta, Tampa, Phoenix. Healthy blend of cash-on-cash yield and population growth.
9% – 12%+ (High Yield / Tertiary Markets)
Smaller industrial or rural multi-family. High cash flow compensating for tenant turnover risk.
Frequently Asked Questions
Does Cap Rate include mortgage payments (debt service)?
No. Cap Rate explicitly excludes mortgage principal and interest payments to evaluate the intrinsic operational quality of the property itself. For leveraged yield with a loan, use Cash-on-Cash Return.
What is Gross Rent Multiplier (GRM)?
Gross Rent Multiplier is the ratio of the property price to its gross annual rental income (Price / Gross Rent). A lower GRM generally signals a potentially undervalued rental opportunity.