Calculators › Cap Rate

Cap Rate Calculator (with NOI and Target-Price)

Cap rate is net operating income (NOI) divided by the property's value. It measures the property's unlevered yield, so you can compare buildings regardless of how each one is financed. Enter your target cap rate to see the most you could pay.

How it's calculated

Cap rate = NOI ÷ property value × 100

Effective gross income = gross rent × (1 − vacancy)
NOI = effective gross income − operating expenses (taxes, insurance, maintenance, management, utilities you pay). Mortgage payments are not operating expenses.
Value at target cap rate = NOI ÷ target cap rate

Worked example

The calculator above starts with these numbers: property value or price $250,000; annual gross rent $26,400; vacancy 5%; annual operating expenses $7,800; your target cap rate 7%.

Effective gross income: $25,080
Net operating income (NOI): $17,280
Cap rate: 6.91%
Value at your target cap rate: $246,857
Gross rent multiplier: 9.47×

Frequently asked questions

What is a good cap rate for a rental property?

There is no single number. Cap rates are lower in expensive, fast-appreciating markets and higher in cheaper or riskier ones. Compare a property to recent sales of similar properties in the same area.

Does cap rate include the mortgage?

No. Cap rate ignores financing on purpose. Use cash-on-cash return to see the effect of your loan.

Why does a higher cap rate mean a lower price?

For the same NOI, value = NOI ÷ cap rate. Raising the cap rate in the denominator lowers the value.

Related guides

More free calculators: Cash-on-Cash Return · BRRRR · Rent vs Sell

Estimates only, for comparing deals. This is not investment, tax, or lending advice. Verify numbers with your lender and a licensed professional before you buy or sell.