$24,000 NOI on $320,000 value
- Cap rate = 24,000 ÷ 320,000 = 0.075
- Cap rate ≈ 7.5%
finance calculator
Cap Rate Calculator
Calculate rental property cap rate from NOI and property value for quick deal screening.
Results
- Cap rate
- 7.50%
How to use this calculator
- Enter the annual net operating income.
- Enter the property's market value or your purchase price.
- See the cap rate as a percentage to compare against your target return.
Inputs explained
- Net operating income
- Annual income after operating expenses, vacancy, maintenance, and management—before mortgage, CapEx, or taxes.
- Property value
- Current market value or purchase price you’re evaluating.
How it works
Cap rate = NOI ÷ property value (expressed as a percentage).
NOI is income minus operating expenses before debt service, CapEx, or income taxes.
Formula
Cap rate (%) = (NOI ÷ Property value) × 100 NOI = Gross rent − Operating expenses (excludes debt service, CapEx, income taxes)
When to use it
- Screening rental properties across markets to hit a target yield.
- Comparing listings or pro formas with different prices and expense loads.
- Checking how renovations or rent increases could shift the cap rate.
Tips & cautions
- Use stabilized NOI that includes vacancy, maintenance, management, and realistic expenses.
- Cap rate ignores financing—pair it with cash-on-cash or DSCR to include debt impact.
- Use market value (not just purchase price) for apples-to-apples comparisons.
- Does not include debt service, CapEx reserves, or income taxes—this is a pure operating return.
- Very sensitive to NOI estimates; small changes can move cap rate meaningfully.
- Does not capture appreciation, timing of cash flows, or financing terms.
Worked examples
$18,000 NOI on $250,000 value
- Cap rate = 18,000 ÷ 250,000 = 0.072
- Cap rate ≈ 7.2%
Deep dive
This cap rate calculator divides annual NOI by property value to show the quick return percentage investors use to sort deals.
It excludes mortgage payments and taxes; use cash-on-cash return or DSCR when you need to factor financing and lender requirements.
FAQs
- Does cap rate include mortgage payments?
- No. Cap rate is pre-financing. Use cash-on-cash return or DSCR to see the effect of debt service.
- Should I use purchase price or market value?
- Use current market value for comparisons. Purchase price is fine for your own underwriting but may understate risk if below market.
- What is a good cap rate?
- It depends on market risk and asset class—higher-risk markets demand higher cap rates. Compare to similar local properties.
- Does NOI include taxes and insurance?
- Operating expenses typically include property taxes and insurance. Exclude mortgage payments, income taxes, and large one-time CapEx.
- Cap rate vs cash-on-cash return?
- Cap rate looks at property income relative to value. Cash-on-cash return includes financing and your actual cash invested.
Related calculators
finance
Loan-to-Value (LTV) Calculator
Figure out the LTV ratio for mortgages, HELOCs, or equipment loans.
finance
Cash-on-Cash Return Calculator
Calculate annual and total cash-on-cash returns from upfront investment and cash flow.
finance
ROI Calculator
Calculate return on investment (ROI) plus annualized ROI for any holding period.
For estimates only. Verify NOI, expenses, and market value with qualified real estate and finance professionals.