Cap Rate Calculator
Free cap rate calculator. Compute the capitalization rate for a rental property from net operating income and purchase price. No signup.
What is a cap rate calculator?
A cap rate calculator works out a rental property’s capitalization rate — net operating income divided by purchase price. It’s the standard number landlords and investors use to compare the raw return of properties before financing.
How this calculator works
- Enter annual rental income, annual operating expenses, and the purchase price.
- Net operating income = rent − operating expenses.
- Cap rate = NOI ÷ price × 100.
- It also reports the expense ratio as a share of rent.
How to use the result
- Compare properties by cap rate — but only among similar types and locations, since risk drives the spread.
- Remember cap rate ignores the mortgage. If you finance, your actual return is cash-on-cash, which this doesn’t show.
- Include realistic operating costs — vacancies, maintenance, property tax, and insurance eat far more than novice landlords expect.
- Higher cap rates usually mean higher risk, older buildings, or less desirable areas — not just “better returns.”
What’s a good cap rate?
It depends on the market: 3–5% is common in high-cost metros, 6–8% in secondary markets, and 8%+ in riskier or smaller towns. A “good” rate balances the return against vacancy, maintenance, and appreciation expectations — a 5% cap in a stable, appreciating city can beat an 8% cap in a declining one.
Common mistakes
- Forgetting operating expenses. Using gross rent instead of NOI inflates the cap rate and the apparent return.
- Comparing across markets. Cap rates only make sense among similar property types in similar areas.
- Confusing cap rate with cash-on-cash return. Cap rate is unlevered; your actual yield depends on the mortgage terms.
Cap rate is the return side of real-estate math — the ROI calculator adds the multi-year picture, and the mortgage payoff calculator models the debt side of the same deal.