Cap rate calculator
Enter a price, rent and operating expenses to see a property's net operating income and cap rate. Change any number and the results update.
Operating expenses: property tax, insurance, repairs, management, HOA and owner-paid utilities. Leave out the mortgage.
Results
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A $250,000 rental at $2,200 a month with 5% vacancy and $650 a month of operating expenses.
- Purchase price
- $250,000
- Monthly rent
- $2,200/mo
- Vacancy
- 5%
- Operating expenses
- $650/mo
- Cap rate
- 6.91%
- Net operating income
- $17,280/yr
- Rent collected
- $25,080/yr
It collects $25,080 a year and keeps $17,280 after operating expenses, a 6.91% cap rate: fair by the usual rule of thumb.
How it's calculated
- Net operating income (NOI)
- A year of rent actually collected (after vacancy) minus a year of operating expenses: property tax, insurance, repairs, management, HOA and utilities you pay. Not the mortgage.
- Cap rate
- NOI ÷ purchase price × 100.
What's a good result?
As a rule of thumb, 8% or more is strong and 5–8% is fair for residential rentals. Lower cap rates are common in expensive, fast-appreciating markets.
Questions
Why doesn't cap rate include the mortgage?
So you can compare properties no matter how they're financed. Cash-on-cash return is the number that includes your loan.
Cap rate or cash-on-cash return?
Cap rate compares properties; cash-on-cash return tells you what your cash earns with your financing. Look at both.
Learn more: Long-term rentals. More calculators: Rental property · Airbnb · Fix & flip · BRRRR · Mortgage · Cash-on-cash return · 70% rule