How it works
Monthly income and operating costs are annualized. Vacancy is deducted from gross potential income, then annual operating expenses are deducted to find NOI.
Property management calculator
Cap Rate Calculator
This free cap rate calculator estimates capitalization rate and net operating income (NOI) from a property's rental income, vacancy, and operating expenses. It's a quick way to compare rental property cap rates across listings or check your own numbers, with every assumption visible and editable — no account required.
Calculator inputs
Estimates for planning only, based on the numbers you enter. Not financial, tax, or legal advice.
Formula
Cap rate = NOI ÷ property value × 100. NOI = effective gross income − operating expenses.
Example
A property with $36,000 NOI and a $500,000 value has a 7.2% cap rate.
Important assumptions
Cap rate is not cash-on-cash return, ROI, or a mortgage return. Do not include financing costs in NOI.
How to Calculate Cap Rate on a Rental Property
Cap rate compares a property’s net operating income (NOI) against its value, independent of financing. First annualize rental income and subtract vacancy loss to get effective gross income, then subtract annual operating expenses (taxes, insurance, maintenance, management — never mortgage payments) to find NOI. Divide NOI by the property’s value and multiply by 100.
Worked example: a fourplex collects $4,200 a month in rent ($50,400 a year), runs a 5% vacancy loss (-$2,520), and carries $15,000 in annual operating expenses. That leaves a $32,880 NOI. Against a $450,000 purchase price, the cap rate is $32,880 ÷ $450,000 × 100 = 7.3%.
What to Include in a Cap Rate Calculation
- Gross potential rental income, annualized
- A realistic vacancy assumption for the market
- Operating expenses: property taxes, insurance, maintenance, management fees, and similar recurring costs
- Current or asking property value — not your purchase price plus closing costs
Common Mistakes When Calculating Cap Rate
- Including mortgage principal or interest in operating expenses — cap rate is calculated before financing
- Skipping a vacancy allowance and using gross potential income as if it were guaranteed
- Comparing cap rates across very different markets or property types as if a single rate were universally “good”
- Mixing up cap rate with cash-on-cash return, which does account for financing
For the return metric that does account for your mortgage, see the Cash-on-Cash Return Calculator, or estimate income lost to turnover with the Vacancy Loss Calculator.
Frequently asked questions
Divide net operating income (NOI) by the property's value, then multiply by 100. A fourplex with $32,880 in annual NOI against a $450,000 value works out to a 7.3% cap rate — NOI already accounts for vacancy and operating expenses, but never financing.
No, never, by definition. Cap rate is deliberately calculated before financing — mortgage principal, interest, and other financing costs are never treated as NOI operating expenses here. That's exactly what separates it from cash-on-cash return, which does account for your loan.
Property taxes, insurance, routine maintenance, management fees, and similar recurring costs that keep the property running day to day, year after year — not one-time capital improvements like a roof replacement, and never mortgage payments, which sit outside the NOI calculation entirely.
There's no universal good rate — it depends on market, location, risk, property type, and growth expectations. A higher cap rate can reflect genuine opportunity or just higher risk, so compare it alongside those other factors rather than as a number on its own.
Vacancy reduces effective gross income, which in turn lowers NOI and therefore the final cap rate. A property with a realistic 5% vacancy allowance will show a noticeably lower cap rate than the same property calculated on fully occupied, gross potential income alone.
Yes, it's completely free with no account needed to start using it. Your inputs stay in the calculator as you adjust them during your session so you can compare a few different properties side by side before deciding which one to pursue.
Related calculators
Rent Affordability Calculator
Estimate a monthly rent budget from income and housing costs.
Property Management Fee Calculator
Compare percentage, flat, and combined management fees.
Prorated Rent Calculator
Calculate rent for a partial occupancy period.
Rent Increase Calculator
Calculate a new rent amount after a percentage or fixed increase.
Vacancy Loss Calculator
Estimate rental income lost while a unit sits vacant.
Cash-on-Cash Return Calculator
Calculate cash-on-cash return from rental income, expenses, financing, and cash invested.