Cap Rate Calculator

What is cap rate?

Capitalization rate (cap rate) is the most widely used metric for evaluating commercial real estate investments. It measures the relationship between a property's net operating income and its purchase price, expressed as a percentage. A higher cap rate indicates a higher potential return relative to the price paid, but it also typically signals higher risk.

For multifamily properties, cap rates generally range from 4% to 10% depending on the market, property class, and condition. Class A properties in major metros often trade at 4-5% cap rates, while value-add deals in secondary markets might command 7-9%. Comparing cap rates across similar properties in the same market is one of the fastest ways to gauge whether a deal is priced fairly.