Cap Rate Calculator
Estimate a rental property's return with our free cap rate calculator. Work out the cap rate from NOI and price, or the value implied by a target cap rate.
How to manually calculate cap rate
Cap rate is net operating income divided by the property value, times 100. It deliberately ignores financing, so it compares properties rather than deals.
Work out net operating income
Annual rent after vacancy, minus operating expenses. Mortgage payments are not operating expenses.
Divide by the property value
Use the purchase price for a deal you're assessing, or current market value for one you own.
Multiply by 100
Compare the result against other properties in the same market, not across markets.
Worked example
A $330,000 rental collecting $30,000 a year with $10,200 of operating expenses.
Net operating income = $30,000 − $10,200 = $19,800
Cap rate = ($19,800 ÷ $330,000) × 100 = 6%
Other calculators you might be interested in
Net Operating Income Calculator
Work out the NOI that sits underneath every cap rate calculation.
Rental Yield Calculator
Gross and net yield, cash flow and cash-on-cash return on a rental property.
70% Rule Calculator
Screen a flip or BRRRR deal fast with the 70% rule maximum offer formula.
Manage up to 3 rental properties for free!
Sign up and get PRO free for 14 days. When the trial ends, keep tracking rent, expenses and reports for up to 3 properties, free forever with Landlord Studio GO.
By continuing you agree to our Terms & Conditions. · Already have an account? Log in
What cap rate tells you
Cap Rate Calculator
Cap rate strips financing out of the picture, so you can compare a property you'd buy with cash against one you'd leverage to 75% - and against what similar buildings actually sold for.
A high cap rate is not always good
A high cap rate is the market pricing in risk - older stock, softer demand, higher vacancy. It is not a free lunch. Always compare against recent sales in the same submarket rather than a national figure.
Why should you use our cap rate calculator?
- Builds NOI properly from rent, vacancy and operating expenses
- Works both ways - enter a price to get the cap rate, or a target cap rate to get the value it implies
- Shows the operating expense ratio alongside the result
- Ignores financing, exactly as cap rate should
- Free, fast and no sign-up
FAQs
Can this calculator work backwards from a target cap rate to a purchase price?
Yes. Switch to "I have a target cap rate" and enter your rent, vacancy, operating expenses and the return you need. The calculator returns the highest price you could pay and still hit that cap rate, which is the number to walk into a negotiation with.
What should I enter in the annual operating expenses field?
Property taxes, insurance, management fees, repairs and maintenance, HOA dues and any utilities you pay. Leave out your mortgage payment, depreciation and capital improvements. Cap rate is an unleveraged measure, so including financing will understate your result.
Why does the calculator ask for a vacancy rate?
Because full-year occupancy is an assumption, not a fact. The vacancy rate converts your gross rent into effective gross income before expenses are deducted, so the NOI behind your cap rate reflects realistic collections. Entering 0% assumes the unit never sits empty.
Is capitalization rate the same thing as cap rate?
Yes, cap rate is simply shorthand for capitalization rate. Both mean net operating income divided by property value, expressed as a percentage. This calculator handles either term, and appraisal reports and broker sheets will usually spell it out in full.
Can I use this for a multifamily or commercial property?
Yes. Enter total monthly rent across all units and the combined annual operating expenses, and the math is identical. Cap rate is the standard valuation metric in commercial real estate, though expect cap rates on commercial stock to sit well above single-family.