Estimate for planning. Not financial or investment advice.
Cap rate is annual NOI divided by price. We also show the value the same NOI implies at 6% and 8% cap rates.
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Cap rate is net operating income divided by price — what the property would yield if you paid all cash. Because it strips out financing, it lets you compare two buildings on equal footing. Higher cap rates usually mean higher risk or lower-growth areas; lower cap rates mean premium, stable markets.
Crucially, NOI excludes your mortgage. Get NOI right (rent minus taxes, insurance, maintenance, management and vacancy) and cap rate becomes a clean yardstick — and a tool to back into value at a target cap rate, shown above.
Net operating income divided by property price or value.
Typically 5–10%; higher means more risk or less growth.
No — that's the point; cap rate ignores financing.
No — it's an estimate.