Cap rate = Net Operating Income (NOI) ÷ Property value or purchase price
NOI = Gross rental income + other income – operating expenses
Exclude mortgage payments, income taxes, and depreciation from operating expenses
Convert the result to a percentage by multiplying by 100
Example: if NOI is $50,000 and property value is $1,000,000, cap rate = 0.05 or 5%
Formula: Cap Rate (%) = (NOI ÷ Property Value) × 100