Cap Rate Calculator

    Looking to evaluate the earning potential of your next investment property? The Cap Rate Calculator from Mortgage Capital helps you determine if a rental property is worth the investment. With just a few inputs, you’ll get a clear snapshot of your expected return—so you can make faster, smarter real estate decisions.

    What Is Cap Rate?

    Capitalization Rate (Cap Rate) is one of the most important metrics in real estate investing. It measures a property’s potential return based on its net operating income (NOI) and purchase price.

    Cap Rate Formula:
     Cap Rate (%) = (Net Operating Income Ă· Property Value) Ă— 100

    • Net Operating Income (NOI): Annual income after subtracting operating expenses (not including mortgage payments).
    • Property Value: The purchase price or current market value of the property.

    Why Cap Rate Matters

    Evaluate Profit Potential: Get a quick estimate of how profitable a property could be.
    Compare Properties: Easily assess multiple investment options side by side.
    Balance Risk & Reward: Higher cap rates may offer more return—but with more risk. Lower rates may indicate more stability.
    Spot Market Trends: Use cap rate benchmarks to identify strong or emerging markets.

    How to Use the Cap Rate Calculator

    1. Input Net Operating Income (NOI) – Annual rental income minus operating expenses.
    2. Enter Property Value – Use the purchase price or appraised market value.
    3. View Results Instantly – The tool will calculate your cap rate as a percentage.

    Cap Rate Example

    You’re evaluating a property with:

    • Annual Rental Income: $50,000
    • Operating Expenses: $15,000
    • Purchase Price: $400,000
    • NOI: $35,000

    Cap Rate = (35,000 Ă· 400,000) Ă— 100 = 8.75%

    This means the property generates an 8.75% return annually before financing costs.

    Cap Rate in Investment Strategy

    While cap rate is a valuable ROI metric, it’s just part of the bigger picture. Be sure to also consider:

    • Cash Flow: Does the property cover the mortgage and generate positive income?
    • Market Trends: Are home values and rents rising in the area?
    • Appreciation & Exit Strategy: What’s the long-term growth potential?

    Make Smart Investments with Mortgage Capital

    At Mortgage Capital, we empower real estate investors with expert guidance and tools like the Cap Rate Calculator. Whether you’re evaluating short-term rentals or long-term buy-and-holds, our mortgage specialists help you secure financing that maximizes returns.

    Call 561-300-0380 today to speak with an investment mortgage expert.
    Start calculating your cap rate now and make confident, data-driven property decisions!