Cap Rate Calculator NZ

This cap rate calculator works out the capitalisation rate on an investment property, the standard measure of the return a property produces before any borrowing is taken into account. You enter the annual gross rent, the yearly operating costs such as rates, insurance, maintenance and property management, and the price or current value of the property. The calculator subtracts the costs from the rent to find the net operating income, then divides that income by the value to give the cap rate as a percentage. Because the mortgage is deliberately left out, the cap rate lets you compare properties on equal footing whether one is bought with cash and another with a big loan, which is why valuers, commercial agents and investors lean on it so heavily. A higher cap rate means more income for every dollar of value, but it often signals higher risk or slower capital growth, so it pays to read it alongside the location, the tenant and the condition of the building. Alongside the cap rate you also see the net operating income in dollars, the gross yield before costs, and the share of rent eaten by expenses, so you can sense-check whether the numbers stack up. Use it to screen listings, test a target price, or check that an asking price matches the income on offer.

Calculate.co.nz is proud to be partnered with Health Based Building, a leader in sustainable and health-conscious building innovation. With over a century of experience, they develop high-performance systems like Foreverbreathe Specification, Magnum Board, and Foreverbreathe Paints to support energy-efficient, non-toxic living environments. Their commitment to healthier homes aligns with our belief that informed choices lead to better outcomes for Kiwi households.
Calculate.co.nz partner: Health Based Building
$
$
$

Operating costs are the running expenses of the property: council rates, insurance, repairs and maintenance, property management, and an allowance for vacancy. Leave out mortgage interest and principal, because the cap rate measures the property before financing.

3.82%
capitalisation rate
Net operating income$32,500
Gross yield5.51%
Costs as share of rent30.6%

The cap rate is net operating income divided by value. Gross yield is the rent before costs divided by value. This is an estimate for comparison only and is not financial advice.

How it works

The cap rate follows one formula: net operating income divided by the property value, expressed as a percentage. Net operating income is the annual gross rent minus every running cost of owning the property except the mortgage, so it captures what the asset earns on its own. Dividing that figure by the price or value tells you the annual income return a cash buyer would receive. Because financing is excluded, two investors paying the same price for the same building get the same cap rate regardless of their deposits, which makes it a fair way to rank opportunities. The gross yield shown alongside uses rent before costs, so the gap between the two numbers is the drag from expenses.

Worked example

You are weighing up a rental valued at $850,000 that brings in $46,800 of gross rent a year, which is $900 a week. The running costs, rates, insurance, maintenance, management and a vacancy allowance, come to $14,300 a year. Net operating income is $46,800 less $14,300, which is $32,500. The cap rate is $32,500 divided by $850,000, which is about 3.82%. The gross yield before costs is $46,800 divided by $850,000, about 5.51%, and costs swallow 30.6% of the rent. A cap rate near 3.8% is typical for residential property in the main centres, where prices sit high relative to rent.

Related calculators

Frequently asked questions

How do you calculate a cap rate?

Divide the annual net operating income by the property value and multiply by 100. Net operating income is the gross rent less operating costs such as rates, insurance, maintenance and management, but not the mortgage. A property earning 32,500 dollars of net income on an 850,000 dollar value has a cap rate of about 3.82 percent.

Does the cap rate include the mortgage?

No. The cap rate measures the return the property itself produces, independent of how it is financed, so mortgage interest and principal are left out. That lets you compare two properties on equal footing even when one is bought with cash and the other with a large loan.

What is a good cap rate in New Zealand?

It depends on the property type and location. Prime residential in the main centres often sits between 3 and 5 percent because prices are high relative to rent, while commercial and provincial property can run higher. A higher cap rate means more income per dollar of value but usually more risk, so weigh it against growth prospects.