Free capitalization rate calculator. Benchmarks included for every major asset class.
Cap rate (capitalization rate) is the most common way to compare the yield of income-producing real estate. It answers: if I paid all cash for this property, what would my unlevered yield be in year one?
Cap rate is a yield metric, not a total return. It ignores financing, appreciation, and tax effects. That\'s actually a feature — it lets you compare properties apples-to-apples regardless of how they\'re financed.
Typical cap rates by asset class (2026):
A common mistake: using the seller\'s pro forma NOI. Always compute cap rate on T-12 actual NOI first, then on stabilized NOI. The difference is usually where the real deal is made or lost.
Depends on asset class and market. Tier-1 multifamily: 5–6%. Value-add multifamily: 6–8%. MHPs: 6.5–9%. Commercial SBA: 7–10%. A higher cap rate means a higher yield — but it usually comes with more risk or worse location.
Cap rate is NOI ÷ Price — it ignores financing. Cash-on-cash yield is annual cash flow ÷ equity invested and includes debt effects. Cap rate measures the asset; cash-on-cash measures your personal return.
Always calculate cap rate on T-12 actual NOI first. That is the cap rate you are buying. Then calculate a stabilized cap rate on realistic pro forma — and understand that getting there requires execution risk.
They are inverse. If NOI stays flat and the price rises, yield (cap rate) compresses. In hot markets, buyers compete and push prices up, which compresses cap rates. Cap-rate expansion is what happens in a downturn.