Cap Rate Calculator (Investment Property)

Capitalization rate (cap rate) is the unlevered yield on a real estate investment, calculated as Net Operating Income (NOI) divided by purchase price. It is the single most-used benchmark for comparing investment properties — higher cap rate generally means higher risk or better deal. Source: CBRE Cap Rate Survey, BiggerPockets, NAR Commercial.

What Counts as NOI

NOI includes all rental income plus other property income (parking, laundry, vending) MINUS operating expenses: property tax, insurance, property management (8-12% of rent), repairs and maintenance, utilities paid by landlord, HOA fees, marketing, legal. NOI EXCLUDES mortgage interest, principal, depreciation, capital expenditures (roof, HVAC replacement), and income tax. Excluding these is critical — the unlevered cap rate is for comparing properties, not for measuring leveraged cash flow.

Market Cap Rate Benchmarks 2026

2026 typical cap rates: multifamily Class A 4.5-5.5%, Class B/C 5.5-7%, single-family rentals 5-9%, retail strip 6-9%, suburban office 8-12% (post-COVID adjustment), industrial 5-7%. Tertiary markets carry 100-200 bps premium over primary cities. Self-storage and mobile home parks are 6-8%. Cap rates rose 50-150 bps from 2022 to 2024 as interest rates climbed; partial reversal in 2025-26 as rates eased.

Cap Rate vs Cash-on-Cash Return

Cap rate is unlevered (assumes all-cash purchase). Cash-on-cash return measures annual cash flow against down payment after financing. A 6% cap deal with 75% leverage at 6.5% mortgage rate produces negative leverage — cash-on-cash below cap rate. Positive leverage requires cap rate above mortgage rate. In 2026 with mortgages at 6.5-7.5%, many "deals" with 5% caps lose money on a leveraged basis even if they look fine on cap.

Last updated May 2026. Sources: CBRE — Cap Rate Survey, NAR Commercial.