How to Calculate Cap Rate (2026 Guide)
EK
Edward R. Kelly
Professional Investor • Oct 2025 • 5 min read
The Capitalization Rate (Cap Rate) is the most fundamental metric in commercial real estate. It measures the unleveraged yield of a property.
Cap Rate Formula
The FormulaCap Rate = Net Operating Income
(NOI) / Property Value
Try it yourself: Cap Rate Calculator
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Resulting Cap Rate:
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Why it Matters
It allows investors to compare apples to apples, regardless of financing. A 6% cap rate in Austin is comparable to a 6% cap rate in Miami, assuming similar risk profiles.
Frequently Asked Questions
What is a good Cap Rate?
A good cap rate depends on risk. 4-5% for Class A, 6-8% for Class B/C.
How is NOI calculated?
NOI = Gross Operating Income - Operating Expenses.