Metrics
Cap Rate
Net Operating Income ÷ property value. The unleveraged return a property generates, independent of financing.
No universal range is a property fact or investment threshold. Compare consistently calculated cap rates using dated, local evidence and the same expense conventions.
How it's calculated
Cap Rate = NOI ÷ Property ValueExample
A property with $36,000 of NOI ($60k gross rent minus $24k expenses) and a $450,000 purchase price has a cap rate of $36,000 ÷ $450,000 = 8.0%.
Why Cap Rate matters
Cap rate lets you compare properties on an apples-to-apples basis regardless of financing. It's also how commercial properties (5+ units) are valued — buyers price them on NOI ÷ market cap rate.
Related terms
NOI (Net Operating Income)
Gross annual rent minus all operating expenses, before debt service and income tax.
Cash-on-Cash Return
Annual cash flow ÷ total cash invested (down payment + closing + rehab). Tells you how hard your mon…
DSCR (Debt Service Coverage Ratio)
Net Operating Income ÷ mortgage payment. Measures whether the property's income comfortably covers d…
1% Rule
Rule of thumb: monthly rent should equal at least 1% of purchase price. A 5-second screening filter,…
Ready to run the Cap Rate math on a real deal?
Free 60-second analysis with labeled starting assumptions and no signup. Pro calculates your Offer Ceiling: the highest price that still meets your targets under the assumptions shown.
Where Cap Rate shows up in TrueCap
The analyzer computes this metric on every run from the assumptions you see and can edit, shows it in the results view beside cash flow after reserves and DSCR, and uses your targets for it in Buy Box fit and in the Offer Ceiling — the highest price that still meets those targets. It appears in the written decision memo and the PDF with the same value and the same inputs.