Cap Rate Calculator

Estimate net operating income and capitalization rate for rental properties

Cap Rate Inputs

Estimate net operating income (NOI) and capitalization rate for a rental property using rent, vacancy, and operating expenses.

Purchase Price

Annual Gross Rent

Vacancy Rate

Annual Operating Expenses

Formula used

NOI = Gross Rent x (1 - Vacancy Rate) - Operating Expenses; Cap Rate = NOI / Purchase Price x 100

NOI: net operating income before debt service
Gross Rent: annual scheduled rental income before vacancy
Vacancy Rate: expected share of rent lost to vacancy (decimal form)
Operating Expenses: annual recurring property operating costs
Purchase Price: property acquisition price or basis used for cap rate comparison
Cap Rate: annual NOI as a percentage of purchase price

This estimate is for planning and deal screening. It is not investment advice.

Cap rate measures annual net operating income relative to property price. It helps compare rental properties quickly before deeper underwriting.

Effective rental income accounts for vacancy.
Operating expenses include maintenance, management, taxes, insurance, and recurring costs.
NOI excludes financing and loan payments.
Cap rate is most useful when comparing similar property types and markets.

Inputs: $320,000 purchase, $34,800 annual rent, 5% vacancy, $10,500 expenses

Result: NOI about $22,560, cap rate about 7.05%

Moderate expense control can move cap rate more than small vacancy changes.

Inputs: $410,000 purchase, $39,600 annual rent, 4% vacancy, $13,800 expenses

Result: NOI about $24,216, cap rate about 5.91%

Higher price points often compress cap rates unless rent growth keeps pace.

Inputs: $280,000 purchase, $33,000 annual rent, 8% vacancy, $11,000 expenses

Result: NOI about $19,360, cap rate about 6.91%

Higher vacancy drag lowers NOI and cap rate even with strong scheduled rent.

No. Cap rate is based on NOI before debt service. Financing effects are better measured with cash-on-cash return.

Include recurring operating expenses such as property taxes, insurance, maintenance, management, and routine reserves.

No. Use cap rate with cash flow, financing terms, market risk, rent trends, and property condition.

Property type, location quality, and risk profile can vary significantly, which affects what cap rates are considered typical.

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