Cap Rate

The capitalization rate ("cap rate") is a property's net operating income divided by its price. It answers one question: how fast does this property pay you, before financing?

cap_rate = NOI / purchase_price
NOI = (rent x (1 - vacancy)) - taxes - insurance - maintenance - management

A $95,000 house with $12,065 of net operating income has a 12.7% cap rate. The same NOI on a $300,000 house is a 4.0% cap rate.

Running it backwards: valuation

The same formula prices a property. If the market's prevailing cap rate for comparable assets is 8% and a property produces $19,938 of NOI, its implied value is $249,225:

property_value = NOI / market_cap_rate

Why context matters

A 7% cap rate is great in Chicago and ordinary in Gary. Cap rates are only meaningful against their own market: Rescover measures every U.S. metro, so your deal's cap rate is shown next to its market's median and top 10%, not a national average.

Where you'll see it in Rescover

Every analysis shows the cap rate with every input behind it visible and editable: the rent (with its RentCast comps), taxes and insurance from the public record, and your own vacancy and maintenance assumptions. Change an input and the cap rate recomputes.