## About This Tool

The online Capitalization Rate Calculator is used to calculate the capitalization rate.

## Capitalization Rate Definition

Capitalization rate, also known as cap rate, is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value. It is used to estimate the investor's potential return on his or her investment.

## Capitalization Rate Formula

The capitalization rate calculation formula is as following:

Capitalization rate = Annual net operating income / Cost (or value)