Calculators › Cap Rate Calculator
Deal analysisBy Cedrick Reese, Property Rental Calculator
Free calculator for a rental property's cap rate and net operating income, based on income alone with financing set aside.
Your property
Taxes, insurance, maintenance, management. Do not include the mortgage.
Cap rate is a snapshot from one property's income, not a return you'll personally earn if you finance the purchase. Not financial advice.
Cap rate is deliberately unlevered. It measures what the property itself produces, so you can compare an all-cash deal against a heavily financed one on equal footing. Your actual cash return, once a loan is involved, is a different number, cash-on-cash return, which layers your financing on top of this figure. Vacancy comes off the top because empty months are a real, expected cost of doing business, not an operating expense you can control the same way as, say, insurance.
On a $300,000 property renting for $2,000 a month, with 5% vacancy and $8,000 of annual operating expenses, effective gross income is $22,800, and NOI comes to $14,800. Divided by the $300,000 value, that's a 4.93% cap rate.
It depends heavily on the market, property type, and risk you're taking on. We cover this in detail in what is a good cap rate.
Cap rate ignores financing entirely. Cash-on-cash return measures your actual cash flow against the cash you put in, mortgage included. See cash-on-cash vs cap rate vs ROI.
Yes. Most analysts apply a vacancy allowance to gross rent before calculating NOI, since a unit that sits empty part of the year is a normal cost of doing business, not a one-off event.
Purchase price when screening a deal to buy. Current market value when checking how a property you already own is performing.
Cedrick Reese, a web developer, built this tool using the standard cap rate formula: net operating income divided by price, with the mortgage deliberately left out so the number reflects the property, not your financing. That's the same unlevered convention used across the industry, and it's the identical equation this site's Rental Property Value Calculator solves in reverse, so the two tools always agree. If how investors typically calculate NOI, such as vacancy or expense treatment, shifts, the formula behind this calculator gets rechecked to match.