Cap Rate Calculator
Cap rate calculator: divide net operating income by property price to compare rental properties on yield, with NOI shown.
Editorial review: Farrow (pseudonym; identity and professional credentials are not disclosed). This page is for educational purposes, not professional advice.
Your inputs
Results update as you type. Nothing you enter leaves your device.
Results
- Net operating income
- $40,000
- Expense ratio
- 33.3%
Example with the starting values
These results use the calculator's initial inputs. Change the values above to calculate your own estimate.
Inputs
- Property price
- 500000 $
- Annual rental income
- 60000 $
- Annual operating expenses
- 20000 $
Results
- Cap rate
- 8%
- Net operating income
- $40,000
- Expense ratio
- 33.3%
How does the Cap Rate Calculator work?
Cap rate = net operating income (NOI) / property value × 100. NOI is rental income minus operating expenses such as taxes, insurance, repairs and management, and it leaves out mortgage payments. $60,000 of rent less $20,000 of expenses is $40,000 NOI, an 8% cap rate on a $500,000 property.
A higher cap rate means more yield and usually more risk. It compares properties as if each were bought with cash.
Frequently asked questions
What is a good cap rate?
It depends on the market and property type. Many investors look for 5% to 10%, with lower rates in safer, high-demand areas.
Does cap rate include the mortgage?
No. Cap rate ignores financing, so it compares properties on income alone. Use cash-on-cash return to include the loan.
What counts as an operating expense?
Property tax, insurance, maintenance, utilities you pay, management fees and vacancy. Mortgage payments and income tax are excluded.
What is the cap rate formula?
Cap rate = net operating income / property value × 100. A $40,000 NOI on a $500,000 property is an 8% cap rate.