A property's annual net operating income as a percentage of its purchase price.
The capitalization rate, or cap rate, is one of the most important metrics in real estate investing. It measures the annual return a property would generate if purchased entirely with cash, expressed as a percentage of the property's value. Cap rate lets investors compare the earning potential of properties across different markets and price ranges without the complications of financing.
Cap Rate = (Net Operating Income ÷ Property Value) × 100Cap Rate equals NOI divided by property value, expressed as a percentage.
If a property generates $24,000 in annual net operating income and is valued at $400,000, the cap rate is ($24,000 ÷ $400,000) × 100 = 6%. This means a cash buyer would earn a 6% annual return on the property's purchase price before financing.
Richify automatically calculates cap rate and other key real estate metrics for every property in your portfolio. Instead of plugging numbers into spreadsheets, you get instant analysis with built-in AI-powered insights to help you spot trends and opportunities across your holdings.
Annual rental income minus operating expenses, before mortgage payments.
The annual cash flow earned on the actual cash invested in a property.
The ratio of property price to annual gross rental income.
The process of determining a property's market value using one or more standardized methods.
Stop calculating real estate metrics by hand. Richify computes cap rate and 10+ other key metrics for every property in your portfolio.
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