Cap Rate Calculator
Let's size up any investment property and set it against the others using the capitalization rate.
What This Calculator Does
It arrives at the capitalization rate by dividing Net Operating Income by the property price — a metric that ignores financing entirely, so you can cut through the noise and compare properties on truly equal footing.
Who Is This For
I designed this for investors comparing several properties at once, for buyers underwriting commercial or multi-family deals, and for anyone exploring Miami investment opportunities who wants one objective yardstick.
How It Works
Enter the property price, the total annual rental income, and the annual operating expenses. The calculator figures your Net Operating Income and shows the resulting Cap Rate as a percentage.
Frequently Asked Questions
What is a good cap rate?
What counts as good moves with location and asset type. In Miami, prime locations usually sit in the 4-6% range, while emerging neighborhoods can yield 7-10%. As a general rule, the higher the cap rate, the higher the risk that comes with it.
What is Net Operating Income (NOI)?
NOI is what's left once you subtract every operating expense — taxes, insurance, maintenance, and management fees — from gross annual rental income. Mortgage payments and depreciation stay out of that number.
Why does cap rate matter?
Since it removes financing from the picture, cap rate hands you a clean, apples-to-apples comparison across properties. It reflects the all-cash yield the asset would earn, which is why it's my go-to metric for weighing competing deals.
What is the relationship between cap rate and price?
Cap rate and price pull in opposite directions — as prices rise, cap rates compress. A lower cap rate tells you you're paying a premium relative to the income the property throws off, usually because you're accepting less risk or buying into a more sought-after location.