Cap Rate Calculator

The capitalization rate measures the relationship between a property's net operating income and its purchase price. Divide the annual NOI by the price, and you get a percentage that tells you what yield the property generates at the current income level. It is the most common metric in commercial real estate for comparing investment opportunities across asset classes, markets, and deal sizes.

Cap rates vary significantly by property type, location, and market conditions. A Class A multifamily property in a primary market might trade at a 4.5% cap rate, while a single-tenant retail property in a secondary market might trade at a 7.5%. Neither number is inherently good or bad. What matters is how the cap rate compares to your cost of capital, your return requirements, and comparable transactions in the market.

Investment teams use cap rates at every stage of a deal. During sourcing, cap rates filter which opportunities are worth pursuing. During underwriting, they frame the entry basis and inform exit assumptions. During IC presentations, they anchor the discussion around value relative to the market. If you are tracking 20 or 30 deals at a time, having cap rates calculated and visible across your entire pipeline, not buried in individual spreadsheets, is the difference between pattern recognition and guesswork.