Calculate the capitalization rate to evaluate property investment returns and compare market opportunities.
Cap Rate = NOI / Purchase Price × 100
The capitalization rate, or cap rate, measures the annual return on a commercial real estate investment before financing costs. It represents the relationship between a property's net operating income (NOI) and its purchase price. A 6.0% cap rate means the property generates $6 of NOI for every $100 of value.
For triple net lease investors, the cap rate is the primary valuation tool. Since NNN tenants pay taxes, insurance, and maintenance, the property's NOI is essentially the base rent collected. This makes cap rate calculations straightforward and comparisons between NNN properties reliable.
Cap Rate = Net Operating Income / Purchase Price x 100A property with $180,000 in annual NOI and a $3,000,000 purchase price has a 6.0% cap rate. If you know the NOI and your target cap rate, you can also reverse the formula to find what a property should be worth: Property Value = NOI / Cap Rate. At a 6.0% target, that $180,000 NOI property is worth $3,000,000. At a 7.0% cap rate, the same income stream is worth $2,571,429.
The only cap-rate survey stored on this site is the Boulder Group Net Lease Research Report for Q2 2026: 6.82% net lease, 6.60% retail, and 7.25% industrial, as of June 30, 2026. The price solver below compares a result with those three prints. This page does not add other sector ranges.
The Boulder Group Net Lease Research Report, Q2 2026, as of Jun 30, 2026. bouldergroup.com · How to calculate a cap rate · Cap rate usage guide
Divide the property's annual net operating income (NOI) by the purchase price, then multiply by 100. A property earning $150,000 NOI purchased for $2.5M has a 6.0% cap rate.
A higher cap rate is a lower price for the same NOI. It is not, by itself, a risk score. Read the lease and the tenant before treating the number as a bid.
This site does not rank a cap rate as good or bad. The Boulder Group Q2 2026 prints stored here are 6.82% net lease, 6.60% retail, and 7.25% industrial, as of June 30, 2026. Use the cap rate tool to compare a result with those prints.
Cap rate is NOI divided by price, before debt service. Cash-on-cash is the annual cash flow after debt service divided by the cash invested. The two use different denominators.
No. Cap rate is calculated before financing costs. It measures the property's intrinsic yield independent of how the purchase is funded. Use the DSCR calculator to evaluate the impact of debt on your returns.