Another name for cap rate — a property's annual NOI as a percentage of its value.
Capitalization rate is the formal name for the metric most investors call 'cap rate.' It expresses a property's annual net operating income as a percentage of its market value or purchase price. Cap rate is the standard metric for comparing real estate investments and is also used in commercial property valuation through the income approach.
Cap Rate = (Net Operating Income ÷ Property Value) × 100Capitalization rate equals NOI divided by property value, expressed as a percentage.
A commercial building generates $120,000 in annual NOI and is valued at $1,500,000. Cap rate = ($120,000 ÷ $1,500,000) × 100 = 8%. This is a healthy cap rate for many commercial markets and would attract serious investor interest.
Richify automatically calculates capitalization 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.
A property's annual net operating income as a percentage of its purchase price.
Annual rental income minus operating expenses, before mortgage payments.
The process of determining a property's market value using one or more standardized methods.
The ratio of property price to annual gross rental income.
Stop calculating real estate metrics by hand. Richify computes capitalization rate and 10+ other key metrics for every property in your portfolio.
Try Richify — Free Trial