Cap Rate Calculator
Calculate the capitalization rate and net operating income of a rental property, and see its value at a target cap rate.
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About the Cap Rate Calculator
The capitalization rate (cap rate) measures a rental property's return without financing: net operating income divided by the purchase price. Investors use it to compare properties. This calculator computes NOI after vacancy and operating expenses (it excludes the mortgage), the cap rate and the property value at a target cap rate.
How to use it
- Enter the purchase price and monthly rent.
- Enter vacancy, property tax, insurance, maintenance and management costs.
- Press Calculate cap rate to see NOI, the cap rate and value at your target.
Cap rate formula
Cap rate = net operating income ÷ purchase price. NOI = rent after vacancy − operating expenses. Mortgage payments and income taxes are not part of NOI.
What is a good cap rate?
| Cap rate | What it often signals |
|---|---|
| Below 4% | Low yield, often high-priced markets |
| 4% to 6% | Moderate yield and risk |
| 6% to 8% | Higher yield, may carry more risk |
| Above 8% | High yield, check condition and area |
Frequently asked questions
How do I calculate cap rate?
Divide net operating income by the purchase price. NOI is rental income after vacancy minus operating expenses, excluding the mortgage.
What is a good cap rate for a rental property?
Often 5% to 8%, depending on market, property type and risk. Higher is not always better.
Does cap rate include the mortgage?
No. Cap rate ignores financing so you can compare properties on equal terms. Use cash-on-cash return to include financing.
What expenses are in NOI?
Property tax, insurance, maintenance, management, utilities you pay and vacancy. Not mortgage principal or interest, depreciation or income taxes.
What is a cap rate used for?
To compare investment properties, estimate value from income and judge risk.
Last reviewed: November 2026. Estimates only, not financial, tax or legal advice.