Cap Rate Calculator
A proper cap rate needs a proper NOI. Itemise the rent, vacancy and operating expenses below - the mortgage stays out, as it should - and get the cap rate, the NOI, and what the property is worth at your target cap rate.
Property & income
Annual operating expenses
Your target
Cap rate
—
| Gross annual rent | — |
| Effective gross income | — |
| Property tax | — |
| Insurance | — |
| Maintenance | — |
| Management | — |
| HOA & other | — |
| Total operating expenses | — |
| Net operating income (year) | — |
| NOI per month | — |
| Implied value at target cap | — |
The link carries your numbers, so a partner or lender sees the same worksheet.
Worked example
A duplex bought for $240,000, renting for $2,100 a month, with a 5% vacancy allowance:
| Line | Amount |
|---|---|
| Gross annual rent ($2,100 × 12) | $25,200 |
| Effective gross income (after 5% vacancy) | $23,940 |
| Property tax | $3,000 |
| Insurance | $1,200 |
| Maintenance (5% of effective income) | $1,197 |
| Management (8% of effective income) | $1,915 |
| HOA & other | $600 |
| Net operating income | $16,028 |
| Cap rate ($16,028 ÷ $240,000) | 6.68% |
At a 7% target cap rate, that same NOI implies a value of about $228,969 - which is how investors turn a cap rate into a maximum offer price. The calculator above is pre-filled with exactly this example; change any number and it recalculates.
The formula
NOI (net operating income) is what the property keeps from its rent before financing: effective gross income minus operating expenses. Operating expenses are the costs of running the property - tax, insurance, maintenance, management, HOA. The mortgage is not an operating expense: cap rate measures the property itself, so two investors with different loans still see the same cap rate on the same building.
Run the formula backwards and it becomes a pricing tool: Value = NOI ÷ Cap Rate. Pick the cap rate your market trades at, and a property's income tells you what it is worth.
Frequently asked questions
How is cap rate calculated?
Divide net operating income by the purchase price (or current market value) and express it as a percentage. NOI is effective gross income minus operating expenses, excluding mortgage payments.
What is a good cap rate?
It depends on the market and the risk. Roughly 5-7% is typical for stable residential rentals in many US markets; higher-yield or higher-risk areas run 7-10%; prime low-risk assets can sit below 5%. Judge a property against similar properties nearby, not a universal number.
Does cap rate include the mortgage?
No - cap rate is deliberately unlevered. Once financing enters the picture, the right measures are cash-on-cash return and DSCR (debt service coverage ratio), which are the next tools on this site.
Cap rate vs cash-on-cash - what is the difference?
Cap rate divides NOI by the full price and ignores the loan. Cash-on-cash divides the cash flow after debt service by the cash actually invested. One property has a single cap rate, but a different cash-on-cash return for every loan structure.
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Cash flow after debt service, divided by the cash you really put in.
DealWorksheet is an educational tool, not financial, legal or tax advice. Figures are estimates based on the numbers you enter; verify a property's actual expenses before making an offer.