Cap Rate Calculator
Capitalization rate for real estate - NOI ÷ property value. Returns cap rate, gross rent multiplier, and cash-on-cash return.
About the Cap Rate Calculator
The Cap Rate Calculator is the foundational tool for evaluating rental real estate investments. It computes the capitalization rate (NOI ÷ property value) - the unlevered yield on the property - along with gross rent multiplier (GRM), net operating income (NOI), and cash-on-cash return based on your specific financing structure.
Cap rate lets you compare properties across different price points and locations on equal footing. A 7% cap rate in Memphis and a 4% cap rate in San Francisco describe the same income economics - the SF property is more expensive relative to its rent because investors expect more appreciation. The calculator surfaces all the math so you can see whether a deal makes sense for your strategy.
Common use cases
- Screen rental properties on listing sites for investment potential
- Compare two properties in different markets on consistent metrics
- Calculate the maximum offer that keeps cap rate above your threshold
- Reverse-engineer the rent needed to hit a target cap rate at a known price
Tips for accurate results
Always use real local expenses, not the seller's estimate. Sellers regularly underreport maintenance, vacancy, and property management costs to inflate the cap rate they're marketing. Budget 1-2% of property value annually for maintenance, 5-10% of gross rent for vacancy, and 8-10% of rent for management. The "trust but verify" version of the deal often has a cap rate 1-2 percentage points lower than the brochure.
Privacy & data handling
The Cap Rate Calculator runs entirely in your browser. Nothing you enter is uploaded, logged, or shared with third parties - the math happens locally and your inputs disappear when you close the tab. There is no signup, no email collection, and no daily-use limit.
What is cap rate?
Cap rate = Net Operating Income ÷ property value. NOI is annual rent minus operating expenses (taxes, insurance, maintenance, vacancy, property management), excluding mortgage payments. A property earning $30k NOI on a $500k purchase has a 6% cap rate. It's the yield on the asset, independent of financing.
What's a good cap rate?
Depends entirely on market and risk. Major metros (NYC, SF, Boston) trade at 3-5% caps - low yield but stable appreciation. Mid-tier markets (Indianapolis, Memphis) trade at 7-9% - higher yield, slower appreciation. Tertiary markets and high-risk areas can hit 10%+ but come with more vacancy and maintenance reality. Match the cap rate to the risk profile you can stomach.
Cap rate vs cash-on-cash return - what's the difference?
Cap rate ignores financing - it's the yield assuming you paid all-cash. Cash-on-cash return accounts for the mortgage: it's annual cash flow (after debt service) ÷ cash invested (down payment + closing). With leverage, cash-on-cash is typically higher than cap rate - that's the point of using debt. The tool shows both.
What expenses should I include in NOI?
Property taxes, insurance, repairs and maintenance (budget 1-2% of property value annually), vacancy allowance (5-10% of gross rent for residential), property management fees if you use a manager (8-10% of rent), and HOA dues if applicable. Don't include mortgage payments - those are below the NOI line.
Does cap rate include appreciation?
No - cap rate is income yield only. Total return on a rental is cap rate + appreciation. A 4% cap in a market growing 5% annually beats a 9% cap in a flat market over a long hold. Investors trading at low caps in major metros are betting on appreciation, not income.
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