How to use the Cap Rate Calculator
Enter the purchase price, gross annual rent, vacancy and operating expenses per year and the result appears straight away. Everything runs in your browser, so nothing you type is uploaded.
The formula
Cap rate = net operating income ÷ price
Examples
- $400,000 property, $42,000 rent, 5% vacancy, $14,000 expenses
Cap rate: 6.48% Net operating income: $25,900.00 Effective gross income: $39,900.00 Operating expense ratio: 35.1%
- Higher expenses of $20,000
Cap rate: 4.98% Net operating income: $19,900.00 Effective gross income: $39,900.00 Operating expense ratio: 50.1%
- Cheaper property at $300,000
Cap rate: 8.63% Net operating income: $25,900.00 Effective gross income: $39,900.00 Operating expense ratio: 35.1%
Limitations and assumptions
Excludes mortgage payments, capital expenditure and taxes on income.
Frequently asked questions
What is the cap rate formula?
Net operating income ÷ property value, where NOI is rent after vacancy minus operating expenses.
Is the mortgage included?
No. Cap rate ignores financing so properties compare on equal terms.
What is a good cap rate?
It depends on the market and risk; higher usually means higher yield and higher risk.
What counts as operating expenses?
Taxes, insurance, maintenance and management, but not mortgage payments.