Real Estate Term

Cap Rate

Net operating income divided by property value; measures unleveraged yield.

Reviewed 9 August 2026 by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Explanation

Cap rate strips out financing to make properties comparable. Lower cap rates typically signal lower risk or higher growth expectations.

Formula

Cap Rate = NOI ÷ Property Value

Example

A property with $24,000 NOI valued at $400,000 has a 6% cap rate.