- Home
- Deal calculators
- Cap rate calculator
Cap rate calculator
Rent, vacancy and operating expenses in; net operating income, cap rate and the property's value at other cap rates out.
Cap rate
0 %
Net operating income of $0 a year on a $0 property.
| Gross rent and other income | $0 |
|---|---|
| Vacancy | $0 |
| Operating expenses | $0 |
| Net operating income (NOI) | $0 |
Value at other cap rates
What this NOI is worth to a buyer who expects each cap rate.
The cap rate leaves out the mortgage on purpose: it measures the property, not the financing. For your return with a loan, use the cash-on-cash calculator.
The cap rate formula
Cap rate = Net operating income / Price
Net operating income (NOI) is the yearly rent you actually collect, minus the costs of running the property. It does not subtract mortgage payments, depreciation or income tax. See what goes into NOI.
Example
A house rents for $2,500 a month. With 5 % vacancy you collect $28,500 a year. Property tax ($3,600), insurance ($1,500) and a 13 % repair and reserve budget ($3,705) add up to $8,805. NOI is $19,695. On a $300,000 price, the cap rate is 6.57 %.
Cap rate is not your return
Cap rate ignores the loan, so it is not what your own cash earns. A 6.5 % cap rate bought with a 7 % mortgage can leave almost no cash flow, because the loan costs more than the property yields. Check the deal with the rental property calculator or the cash-on-cash calculator.
Questions
What is a good cap rate for a rental property?
It depends on the market and the property. Lower cap rates are common in expensive, fast-growing cities where buyers expect appreciation; higher cap rates are common in cheaper or slower markets and older buildings, where buyers want more income for more risk. Compare a property with similar ones nearby rather than with a national number.
Does cap rate include the mortgage?
No. Cap rate is net operating income divided by price, as if you paid cash. That makes properties comparable no matter how they are financed. To see your return with a loan, use cash-on-cash return.
Should I use the purchase price or the current value?
Use the purchase price to judge a deal you are about to buy. Use today's market value to see what your property earns on the money tied up in it now.
Why does the seller's cap rate look higher than mine?
Listings often leave out vacancy, repairs, reserves or management, or use a property tax bill that will go up after the sale. Rebuild the NOI with your own numbers before you compare.
How do I get the value from a cap rate?
Divide the NOI by the cap rate. A property with $18,000 of NOI is worth $300,000 at a 6 % cap rate and $360,000 at 5 %. The table in the calculator does this for several rates.
Sources
Next steps
Last updated November 5, 2026.