Cap Rate Calculator – Rental Property Capitalization Rate

A cap rate calculator that finds the capitalization rate on a rental from its price, monthly rent, vacancy, and itemized operating expenses. It builds net operating income (NOI) step by step — gross income, vacancy loss, effective gross income — then divides NOI by the property value. It also reverses the math to value a property from a target cap rate, and excludes mortgage and debt service.

🔒 Pure browser calculation — nothing is uploaded.

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Parking, laundry, storage, pet fees — per month.
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% of rent
% of rent
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Reserve for roof, HVAC, big-ticket replacements.
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Exclude the mortgage / debt service, income tax, and depreciation — cap rate is unleveraged on purpose.

Your cap rate

Annual gross income—
− Vacancy & credit loss—
Effective gross income—
− Annual operating expenses—
Net operating income (NOI)—
Cap rate—

NOI and cap rate exclude your mortgage and debt service on purpose — the rate measures the property, not your loan. For the return on the actual cash you put in, see the cash-on-cash return calculator.

Find value from a target cap rate

The income approach in reverse: enter the cap rate comparable properties trade at and see what your NOI is worth at that rate — implied value = NOI ÷ cap rate.

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Net operating income (NOI)—
÷ Target cap rate—
Implied property value—

How to calculate a cap rate

The capitalization rate is the cleanest one-number summary of a rental property's operating return: cap rate = net operating income ÷ property value × 100. Because it ignores financing entirely, it lets you line up deals side by side regardless of who's paying cash and who's borrowing. This calculator builds the number from the ground up so nothing is hidden: it annualizes your monthly rent, adds other income like parking or laundry, knocks off a vacancy and credit-loss allowance to reach effective gross income, then subtracts your itemized operating expenses to land on NOI.

Expenses are itemized for a reason. Management and maintenance scale with the rent, so they're entered as percentages; property tax, insurance, and HOA are fixed dollar amounts. The line most beginners skip is capex — a reserve for roofs, furnaces, and water heaters that don't fail annually but always eventually do. The single biggest cap-rate mistake, though, is putting the mortgage into the expenses. Do not. NOI excludes mortgage principal, interest, and all other debt service, along with income tax and depreciation. Slip a loan payment in there and your cap rate collapses, making a perfectly good deal look like a loser.

Once you have a cap rate, use it for comparison, not as a verdict. A low rate often signals an expensive, low-risk market where buyers bid prices up; a high rate signals cheaper or riskier areas with more income relative to price. The math also runs in reverse — divide a property's NOI by the prevailing market cap rate to estimate its value, which is exactly how appraisers apply the income approach. The "find value from a target cap rate" panel above does this for you: raising NOI by lifting rent or trimming expenses increases value at a multiple of the cap rate.

Cap rate is unleveraged by design, so pair it with financing-aware tools to see your real return: run the cash-on-cash return calculator to fold in your mortgage and down payment, screen flip purchase prices with the 70% rule calculator, and browse every tool in the real estate investment calculators hub.

Frequently Asked Questions

The capitalization rate is a property's net operating income (NOI) divided by its value or purchase price, expressed as a percentage: cap rate = NOI ÷ property value × 100. A $400,000 building producing $28,000 of NOI has a 7% cap rate. It tells you the unleveraged annual return the property's operations throw off — what you'd earn on the cash if you bought it outright with no loan — which makes it the standard way to compare rental deals against each other regardless of how they're financed.

Work out NOI first, then divide by the price. Annualize the rent (monthly rent × 12), add any other income, subtract a vacancy allowance, then subtract annual operating expenses to get NOI. Divide NOI by the property value and multiply by 100. This cap rate calculator does every step live as you type, showing your gross income, effective gross income, NOI, and the final percentage so you can see exactly where the number comes from.

No — and this is the error that trips up most beginners. Cap rate is calculated on net operating income, which excludes mortgage payments and all debt service entirely. A property has one cap rate whether you pay all cash or borrow 80%, because the rate measures the asset's performance, not your financing. If you want a return figure that does account for the loan and your down payment, that's cash-on-cash return, not cap rate.

Net operating income is effective gross income (rent after vacancy plus other income) minus operating expenses. Operating expenses include property tax, insurance, maintenance and repairs, property management, HOA dues, and a reserve for capital expenditures. NOI deliberately excludes mortgage principal and interest, income tax, and depreciation — leave all three out of the expense fields or your cap rate will be wrong.

Itemizing forces you to account for the costs flippers and first-time landlords routinely forget. Management and maintenance scale with the rent, so they're entered as percentages of rent; property tax, insurance, and HOA are fixed dollar amounts. The big one is capex — a reserve (often 5%) for roofs, HVAC, and water heaters that don't fail every year but will. Leaving capex out is the most common way investors overstate NOI and pay too much for a deal.

It depends on the market and the asset. Lower cap rates (3–5%) usually signal expensive, stable, low-risk markets where prices are bid up; higher cap rates (8–10%+) appear in cheaper or higher-risk areas and reflect more income relative to price. There's no universal 'good' number — a 5% cap in a prime metro and a 9% cap in a secondary market can both be reasonable. Use the rate to compare similar properties in the same area, not to judge a deal in isolation.

No rental stays occupied 100% of the time — tenants turn over, units sit empty between leases, and some rent goes uncollected. Building in a vacancy percentage (5% is a common default; check local norms) turns optimistic gross rent into realistic effective gross income before expenses. Skipping it inflates NOI and overstates your cap rate, making the deal look better than it is.

Cap rate measures the property's unleveraged operating return — NOI over value, with no loan in the picture. Cash-on-cash return measures your return: annual pre-tax cash flow after the mortgage, divided by the actual cash you invested (down payment plus closing and rehab costs). Two investors buying the same building have the same cap rate but very different cash-on-cash returns depending on their financing. Run yours in the cash-on-cash return calculator.

Both are valid, they just answer different questions. Dividing NOI by the purchase price gives your acquisition cap rate — the return you locked in when you bought. Dividing by today's market value gives the current cap rate, useful for deciding whether to hold or sell. Use whichever fits your question; this calculator simply divides NOI by whatever value you enter.

Yes — that's reverse cap-rate math, and this calculator does it for you. Enter a target cap rate (the rate similar properties in the area trade at) and it divides your NOI by that rate to show the implied value: NOI ÷ cap rate. If your building produces $30,000 of NOI and comps trade at a 6% cap, its implied value is $30,000 ÷ 0.06 = $500,000. Investors and appraisers use this 'income approach' constantly — it's why raising NOI lifts value at a multiple of the cap rate.

No. This calculator is pure client-side JavaScript — your property price, rent, and expense figures are never uploaded, logged, or stored. It keeps working offline once the page has loaded.