Cap rate calculator
Net operating income and cap rate for a rental, with the property value at other cap rates.
- ๐บ๐ธ US federal & state rules
Cap rate
6.5%
$19,500 net operating income on $300,000
- Net operating income
- $19,500
- Gross rent a year
- $30,000
- After vacancy
- $28,500
- Expense ratio
- 31.6%
This is an example. Enter your numbers above and press the button to see your own result.
Value at other cap rates (same NOI)
| 4% cap rate | $487,500 |
|---|---|
| 5% cap rate | $390,000 |
| 6% cap rate | $325,000 |
| 7% cap rate | $278,571 |
| 8% cap rate | $243,750 |
| 10% cap rate | $195,000 |
- Operating expenses are property tax, insurance, repairs, management, utilities you pay and HOA. Mortgage payments and depreciation are left out of NOI.
- Cap rate ignores financing. To see the return on your own cash with a loan, use the cash-on-cash calculator.
Show the math
| Gross rent | $2,500 ร 12 = $30,000 |
|---|---|
| Less vacancy | $30,000 ร (1 โ 5%) = $28,500 |
| NOI | $28,500 โ $9,000 expenses = $19,500 |
| Cap rate | $19,500 รท $300,000 = 6.5% |
What to do next
How it works
Yearly rent is reduced by the vacancy rate, then operating expenses are subtracted to get net operating income (NOI). Cap rate is NOI divided by the price or value.
The table also turns your NOI into a value at other cap rates, which is how appraisers and buyers often price income property.
Things to keep in mind
Seller listings often show NOI with low expense estimates. Budget for repairs and management even if you plan to do the work yourself.
Frequently asked questions
How do you calculate cap rate?
Divide net operating income by the property value. $19,500 of NOI on a $300,000 property is a 6.5% cap rate.
What is a good cap rate?
There is no single number. Higher cap rates usually come with more risk or less expensive areas, and lower ones with stable, high-demand locations. Compare against similar properties nearby.
Does cap rate include the mortgage?
No. Cap rate measures the property as if bought with cash. Use cash-on-cash return to include financing.