Cap rate calculator
Cap rate compares net operating income with property value without financing, which makes properties easy to compare.
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How to use it
- Enter property value or price, gross annual rent, vacancy rate and annual operating expenses.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Effective income = annual rent x (1 - vacancy). NOI = effective income - operating expenses. Cap rate = NOI / property value x 100.
Example
Inputs: Property value or price = 1,000,000, Gross annual rent = 80,000, Vacancy rate = 5 %, Annual operating expenses = 16,000. Result: Cap rate: 6%; Net operating income (NOI): 60,000.00; Effective income after vacancy: 76,000.00.
Limits and caveats
- Excludes loan payments, depreciation and income tax, which sit outside NOI by definition.
- Uses one year of income and does not reflect rent growth or value changes.
Questions about this tool
What counts as operating expenses?
Maintenance, management, insurance, service charges and property tax, but not loan payments.
Is a higher cap rate better?
It means more income for the price, but it can also reflect higher risk or a weaker location.
How is it different from cash on cash return?
Cap rate ignores financing. Cash on cash return subtracts loan payments and divides by your cash only.