Cap rate is net operating income (NOI) divided by current market value (or purchase price). A ₩50,000 NOI on a ₩1,000,000 value is 5%. It is an unlevered yield snapshot, not a mortgage payment and not cash-on-cash return after debt. You supply NOI and value; this page does not invent rents or expenses.
Cap rate5%
Simple payback (value ÷ NOI)20
NOI used50,000
Value used1,000,000
How this calculation works
Cap rate % = (NOI ÷ value) × 100. NOI is rent and other operating income minus operating expenses, before debt service and income tax.
Simple payback years = value ÷ NOI when NOI is positive — the inverse of the cap rate, ignoring growth, vacancies, and capex.
This is not a loan tool. Leverage, interest, and amortization belong on mortgage and loan-payment calculators.
Compare cap rates only within a similar asset class and market. A higher cap rate can mean higher yield or higher risk, not “a better building”.
Worked example
NOI 50,000 on value 1,000,000 → cap rate 5%, implied simple payback 20 years. Double NOI to 100,000 and the cap rate is 10%.
Frequently asked questions
Is NOI the same as cash flow?
No. Cash flow after financing subtracts mortgage payments. Cap rate deliberately ignores debt so properties with different loans can be compared.
Should I use asking price or appraisal?
Use the value you mean: offer price for a deal screen, appraisal or recent sale for a market cap rate. Mixing them muddles the percentage.
Does this include vacancy?
Only if you already netted vacancy out of NOI. The formula will not subtract a vacancy rate for you.
Cap rate vs cash-on-cash?
Cash-on-cash divides cash after debt by cash invested (down payment and costs). Cap rate divides NOI by total value. They answer different questions.
What about Korean 임대수익률?
Headline 임대수익률 sometimes uses gross rent ÷ price. Cap rate needs NOI (after operating costs). Do not mix the two.