The cap rate calculator, which is also called the capitalization rate calculator, is a free tool on the internet for all those who are interested in real estate. As the name suggests, it calculates the cap rate that is based upon the value of the real estate property in talks and the income derived from letting it out.

You can use it in order to decide whether a property’s price is justified or not and also to determine the selling price of a property you own. So, to calculate the cap rate you need to insert the variables required by the cap rate formula. Results will be generated automatically.

The cap rate, by definition, is the rate of return on any real estate investment property. In simple words, it describes what part of your original, initial investment will return to you every year on a recurring basis.

The description clearly makes it super easy to figure out the cap rate formula all by yourself. Basically, you get the cap rate is the ratio of net operating income (NOI) to property value or sales price.

cap rate = net operating income / property value