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
Cap rate tells you the return without financing. Now see what happens when you add a mortgage.
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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