Note: This is an estimate, not investment advice. Cap Rate = Net Operating Income / Price * 100, a financing-independent yield metric used to compare properties. This means you should exclude mortgage payments from operating expenses.
For Real Estate Investors & Brokers
For real estate investors and brokers who need a financing-independent yield number in the first 30 seconds of screening a listing, before they ever talk to a lender. Our Cap Rate Calculator quickly provides the Net Operating Income (NOI) and Cap Rate percentage, crucial for comparing different properties without getting bogged down in financing details. Remember, Cap Rate = Net Operating Income / Price * 100, a key metric for evaluating investment potential.
How to Use This Calculator
1. Type the asking price or your offer price into "Property Price ($)".
2. Enter the gross rent you can realistically collect each month — not the annual figure, the field is monthly.
3. Enter the total annual operating expenses (taxes, insurance, maintenance, vacancy allowance, property management) excluding the mortgage payment.
4. Read the Annual NOI and Cap Rate cards, which update live as you type.
5. Copy the substituted formula line into your deal notes so the broker can see exactly how the number was derived.
FAQ
Q: What is a good cap rate for a rental property?
A: It is market-relative, but a common screening band in the US is 4–6% for low-risk, high-appreciation metros and 8–12% for secondary markets or value-add deals — anything under 4% usually means the buyer is betting on appreciation rather than income.
Q: How do you calculate a cap rate?
A: Cap Rate = Net Operating Income ÷ Property Price × 100, where NOI is annual gross rent minus annual operating expenses. A property with $2,400/month rent and $6,000 in annual expenses on a $300,000 price has NOI of $22,800 and a 7.60% cap rate.
Q: Does the mortgage payment go into operating expenses?
A: No. Cap rate is deliberately financing-independent, so you exclude debt service and include only taxes, insurance, maintenance, repairs, vacancy allowance, and property management — this is why two buyers with different loans get the same cap rate on the same building.
Q: How is cap rate different from cash-on-cash return?
A: Cap rate ignores how you paid for the property while cash-on-cash return divides your actual annual pre-tax cash flow by the cash you put in, so leverage can lift cash-on-cash far above the cap rate; once you have your NOI here, run it through the ROI and ROAS Calculator to model the levered return on your down payment.