Cap Rate Calculator
Capitalization rate measures the unlevered return on a property relative to its purchase price. It's the fastest way to compare deals across markets, property types, and price points.
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Cap Rate
0.00%
Cap Rate = NOI / Purchase Price × 100
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How to Use the Cap Rate Calculator
1. Enter the purchase price — the total acquisition cost of the property (or current market value if you already own it).
2. Enter annual gross rent — the total rent you expect to collect each year before any deductions.
3. Adjust the vacancy rate — 5% is a reasonable default for stable markets, but adjust up for higher-risk areas or turnover-heavy properties.
4. Enter operating expenses — property taxes, insurance, maintenance, and management fees. Do not include mortgage payments — cap rate measures the property's return before financing.
What Is a Good Cap Rate?
There's no single “good” cap rate — it depends on your strategy, market, and risk tolerance:
| Cap Rate | Typical Market | Investor Profile |
|---|---|---|
| 3-5% | Gateway cities (SF, NYC, LA) | Appreciation-focused, lower risk |
| 5-7% | Secondary markets, suburbs | Balanced cash flow + growth |
| 7-10% | Midwest, South, tertiary markets | Cash-flow focused |
| 10%+ | High-risk or distressed areas | Experienced investors, value-add |
Cap Rate vs. Cash-on-Cash Return
Cap rate and cash-on-cash return are both essential metrics, but they measure different things:
- Cap rate ignores financing. It tells you how the property performs regardless of how you pay for it.
- Cash-on-cash return factors in your mortgage. It tells you how your invested cash is performing.
Use cap rate to compare properties. Use cash-on-cash to evaluate how a specific deal works with your financing.
Cap Rates by City
Compare cap rates across the top US real estate investing markets.
Detroit, MI
11.2%
Excellent$85,000 median
Cleveland, OH
9.8%
Very Good$105,000 median
Memphis, TN
9.2%
Very Good$130,000 median
Toledo, OH
9.0%
Very Good$88,000 median
Dayton, OH
8.8%
Very Good$95,000 median
Akron, OH
8.6%
Very Good$100,000 median
Birmingham, AL
8.5%
Very Good$125,000 median
Little Rock, AR
8.3%
Very Good$150,000 median
Indianapolis, IN
8.1%
Very Good$175,000 median
Tulsa, OK
7.9%
Good$155,000 median