The capitalization rate measures a property's potential return independent of financing. It's Net Operating Income ÷ Property Price, and it's the fastest way to compare investment properties.
Cap Rate
7.6%
What does this mean?
A cap rate of 4–8% represents a balanced risk/return profile. This is the sweet spot for many investors seeking stable cash flow with reasonable appreciation potential.
Keep running the numbers
Smart investors cross-check with multiple metrics before making an offer. Here are a few that pair well with this one.
Measure the annual return on your actual cash invested, factoring in financing, expenses, and rental income.
Calculate Net Operating Income — the foundation of commercial real estate valuation.
Quickly screen and compare rental properties by how many years of gross income cover the purchase price.
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