Free tools / Cap rate calculator
Cap Rate Calculator
Enter a rental property's price, income, and expenses to get its net operating income and cap rate instantly. Add more properties to compare cap rates side by side, then export the analysis as a PDF report, CSV spreadsheet, or shareable image. Free, no signup.
Property
All units combined for duplexes, buildings, or commercial
Parking, laundry, storage
5–8% is a common assumption
Annual operating expenses
Percent of collected rent (0 if self-managed)
Mortgage payments are NOT an operating expense — cap rate is financing-independent on purpose.
Cap rate — Property 1
5.33%
4–7% — where most rentals in good neighborhoods land. Moderate risk, moderate return.
The math
- Gross annual income
- $31,200
- After 5% vacancy
- $29,640
- Operating expenses
- −$10,971
- Net operating income
- $18,669
- ÷ Purchase price
- $350,000
Work it backwards
Given this income, what price hits your target cap rate?
≤ $266,697
Export your analysis
PDF opens a print-ready report, CSV opens in Excel or Google Sheets, Image saves a shareable JPEG of the comparison.
How to use the cap rate calculator, step by step
- 1
Enter the purchase price
The price you'd pay for the property — the asking price, or the number you plan to offer.
- 2
Enter the monthly rent
What the property collects (or would collect) in rent each month. For a duplex or a building, add all the units together. If you don't know, look at what similar places nearby rent for.
- 3
Set a vacancy rate
No rental stays occupied every single month — tenants move out and it takes time to fill the unit. A 5–8% allowance covers those empty weeks; leave the default if you're not sure.
- 4
Fill in the yearly expenses
Property taxes and insurance (the county appraiser's site and an insurance quote will tell you), upkeep, HOA dues if any, and property management as a percent of rent — set it to 0 if you'll manage it yourself. One thing you should NOT include: the mortgage. Cap rate deliberately ignores financing so any two properties can be compared fairly.
- 5
Read your cap rate
The big green number is the property's yearly return as a percent of its price, and the gauge shows where that lands on the typical 0–12% range — with a plain-English read of what it means underneath.
- 6
Compare properties or work backwards
Click "Add property" to line up several deals side by side and see which one earns best. Or use the "work it backwards" box: pick the return you want, and it tells you the most you can pay to get it. When you're done, export the whole analysis as a PDF, spreadsheet, or image.
What is a cap rate?
The capitalization rate (cap rate) is the most common way to compare rental property returns. It answers one question: if you bought this property with cash, what percent of your money would it earn back each year from operations?
Cap rate = Net operating income ÷ Purchase price × 100
Net operating income (NOI) = rental income after vacancy − operating expenses, before any mortgage payment.
Because it ignores financing, a real estate cap rate lets you compare a duplex in Tampa against a rental house in Charlotte against a fourplex in Fort Worth on equal footing — the property's earning power, not your loan terms.
An example, start to finish
Say you're looking at a $350,000 house that rents for $2,600 a month. Over a full year that's $31,200 — but no rental stays occupied every month, so set aside 5% for the weeks it sits empty between tenants. That leaves $29,640 you can realistically expect to collect.
Now the costs of owning it: $4,200 in property taxes, $1,800 for insurance, $2,000 for upkeep, about $2,371 for a property manager (8% of the rent collected), and $600 of other costs. That's $10,971 a year in expenses. Subtract it from the $29,640 and the property actually earns $18,669 a year — what investors call net operating income.
Finally, divide what it earns by what it costs: $18,669 ÷ $350,000 = a 5.33% cap rate. In other words, bought with cash, this house would pay back about 5.3% of its price every year. That's a normal number for a rental in a decent neighborhood. These are the default numbers in the calculator above — swap in your own deal.
What's a good cap rate?
There's no single right answer, because a cap rate is really a price on risk: the higher the return, the more risk the market sees in the property. The same 8% that's a bargain in one ZIP code is a warning sign in another. Typical ranges:
| Cap rate | Typical profile | Trade-off |
|---|---|---|
| 3–5% | Prime locations, Class A properties, hot metros | Low cash flow; you're betting on appreciation |
| 5–7% | Stabilized rentals in solid neighborhoods | The balanced middle — most deals live here |
| 7–10% | Working-class areas, older stock, smaller markets | Strong cash flow; more management intensity |
| 10%+ | Distressed properties or declining areas | High return on paper — verify every assumption |
Single-family, multifamily, or commercial — same math
Cap rate was born in commercial real estate, so the calculator works for any income property — what changes is only what you type in:
- Duplex / triplex / fourplex: enter the combined rent of all units as monthly income. Budget more maintenance per door than a single-family home.
- Apartment buildings: same approach — total scheduled rent, a realistic vacancy rate for the market, and management (nobody self-manages 20 doors for long).
- Warehouse / retail / office (NNN leases): enter only the expenses you pay as landlord. Under a triple-net lease the tenant covers taxes, insurance, and maintenance — so those fields are often zero and cap rate ≈ rent ÷ price.
One caution: typical cap rates differ by asset class. A 5% cap on an apartment building and a 5% cap on a warehouse carry different risk profiles — always compare within the same property type and market.
When cap rate is the wrong tool
Cap rate assumes the property has steady, predictable rent coming in. That means it breaks down for flips (no rent at all), for big renovation projects (what the property earns today isn't what it will earn after the work), and for short-term rentals where occupancy swings month to month. It also says nothing about your mortgage — if you want to know the return on the cash you personally put in, that's a different measure called cash-on-cash return. But for its real job — quickly comparing rental properties on equal footing — it's the fastest first filter in real estate.
The calculator rates the deal. WhoseTitle finds it.
Draw any neighborhood on the map and get every owner inside it — tenure, absentee status, and likelihood to sell — free from public county records.
Cap rate FAQs
What is a good cap rate for a rental property?
Most stabilized rentals trade between 4% and 10%. Prime locations with strong appreciation prospects often sell at 4–6%, solid cash-flow neighborhoods at 6–8%, and higher-risk properties or markets at 8–10%+. A "good" cap rate is the one that beats comparable properties in the same submarket — always compare like with like.
Does cap rate include the mortgage?
No. Cap rate deliberately excludes financing — it measures the property's own earning power (net operating income ÷ purchase price), regardless of how you pay for it. That's what makes cap rates comparable between an all-cash buyer and a leveraged one. To measure your return including the loan, use cash-on-cash return instead.
What counts as an operating expense?
Property taxes, insurance, maintenance and repairs, property management, HOA dues, utilities you pay as the landlord, and a vacancy allowance. Not included: mortgage payments, depreciation, income taxes, and capital expenditures like a roof replacement (though many investors budget a capex reserve separately).
What does a 7% cap rate mean?
It means the property's annual net operating income equals 7% of its price. A $300,000 property at a 7% cap produces $21,000 of NOI per year before any mortgage. Put differently: bought with cash, it would take about 14 years of that income to return the purchase price.
Cap rate vs. ROI — what's the difference?
Cap rate ignores financing and measures the property itself; ROI (or cash-on-cash return) measures the return on the cash YOU put in, after debt service. A 6% cap rate deal can produce a 12% cash-on-cash return with the right loan — or a negative one with the wrong loan.
Does this calculator work for duplexes, apartment buildings, and commercial property?
Yes — cap rate is the same formula for every asset class (it originated in commercial real estate). For a duplex, triplex, or apartment building, enter the combined rent of all units as monthly income. For commercial or industrial property like a warehouse on a triple-net (NNN) lease, enter only the expenses YOU pay as landlord — under NNN the tenant covers taxes, insurance, and maintenance, so those fields may be zero. Just remember typical cap rates differ by asset class and market, so compare like with like.
How can I increase a property's cap rate?
Raise net operating income or buy below market. In practice: bring rents to market rate, add income (parking, storage, laundry), cut expenses (contest the tax assessment, shop insurance, reduce vacancy), or negotiate a lower purchase price. This is the entire value-add playbook in one formula.