What is the cap rate formula?

Cap rate equals net operating income divided by property value, times 100 to read it as a percentage. NOI is the annual gross rent minus operating expenses, so the full chain is (income − expenses) ÷ price × 100. A building renting for 48,000 a year with 14,000 in expenses has an NOI of 34,000; at a 500,000 price that is 34,000 ÷ 500,000 × 100 = 6.8 percent.

How do I calculate NOI?

Net operating income is annual gross rent minus annual operating expenses. Operating expenses include property tax, insurance, repairs and maintenance, property management, utilities you cover, and a vacancy allowance. They do not include your mortgage payment or income tax. So 48,000 rent minus 14,000 in taxes, insurance and upkeep gives an NOI of 34,000, and that 34,000 is what feeds the cap rate.

What is a good cap rate?

Most stabilized residential rentals trade between roughly 4 and 10 percent depending on the market. A 4 to 5 percent cap is typical of expensive coastal cities where prices are high relative to rent; 7 to 10 percent shows up in cheaper or higher-vacancy markets where the higher yield pays you for more risk. There is no single right number, only what is normal for that location and asset class.

Does a high cap rate mean a better deal?

Not on its own. A higher cap rate means more yield per dollar of price, but it usually comes with more risk: a weaker neighborhood, older building, shorter leases or higher vacancy. A lower cap rate often signals a safer, more in-demand asset that the market has bid up. Read cap rate as a risk-and-yield dial, not a quality score, and compare it only against similar properties.

How do I find the price from a cap rate?

Rearrange the formula: property value equals NOI divided by the cap rate written as a decimal. Switch this tool to the Cap rate to value mode, enter the NOI (or let it derive NOI from income minus expenses) and your target cap rate, and it returns the price. An NOI of 30,000 at a 6 percent target is 30,000 ÷ 0.06 = 500,000, which is the most you would pay to hit that return.

Does cap rate include the mortgage?

No, and that is the point. Cap rate uses NOI, which is figured before any debt service, so it describes the property itself rather than how you financed it. Two buyers looking at the same building, one paying cash and one with a loan, see the same cap rate. To bring the mortgage in you would look at cash-on-cash return or the debt service coverage ratio instead.

Screen a rental listing before you tour it

A listing shows asking price and the agent quotes a rent. Punch in the rent as annual gross income, estimate expenses at a third of rent if you have nothing better, and read the cap rate in seconds. If a 500,000 duplex pencils out at 3 percent while everything else in town is 6 to 7, you know to skip the tour and spend the Saturday on a listing that clears your bar.

Back into the most you should offer

You know the NOI from the seller's operating statement and you will not buy below a 6.5 percent return. Switch to the value mode, type the NOI and 6.5, and the tool hands you the ceiling price. Offer at or under it and your return is protected no matter how the seller framed the asking number.

Set a rent target for a flip-to-rent property

You are buying at a fixed price and need to know what NOI the building must throw off to be worth it. Use the NOI mode, enter the purchase price and your required cap rate, and the tool returns the NOI you have to hit. Subtract your expense estimate from that and you have the gross rent the renovation has to support.

Compare a portfolio of candidate deals on one ruler

Three buildings, three prices, three rent rolls. Cap rate puts them on a single axis so a cheaper building with thin rent and a pricier one with strong rent can be ranked honestly. Copy each result, paste them into one note, and the highest-and-safest cap rate is the one to push on.

Cap Rate Calculator — NOI, Capitalization Rate and Property Value

NOI ÷ property value × 100 = cap rate — solve for rate, value or NOI, with gross rent multiplier — browser-only

Runs locally
Category Calculator
Best for Getting a realistic range before a purchase, plan, workout, or schedule decision.

Quick scenarios

Inputs

Annual gross income

Annual operating expenses

Property price

Result

NOI /yr

$34,000

Cap rate

6.80%

Gross rent multiplier

10.42

Lower cap rate, lower yield and lower risk

How to read it

Cap rate ignores your mortgage on purpose, so two buyers comparing the same building see the same number. Use it to compare deals, not to size a loan.

What this tool does

Free cap rate calculator for real estate investors sizing up rental property returns. Capitalization rate is net operating income (NOI) divided by property value, written as a percentage. Enter the annual gross rent, the operating expenses (property tax, insurance, maintenance, management, vacancy), and the asking price; the tool computes NOI = income minus expenses, then the cap rate. Flip the mode and it solves the other way: give it a target cap rate plus NOI and it returns the price you should pay, or give it a price plus a target rate and it returns the NOI the deal has to produce. A gross rent multiplier is shown alongside as a second screening ratio. Cap rate deliberately leaves out your mortgage, so it stays a clean, lender-agnostic way to compare two buildings. Everything runs in your browser with one-click copy and a shareable link that reopens your exact numbers. 100% client-side, nothing is uploaded.

Tool details

Input: Numbers; The page exposes text boxes, numeric controls, file pickers, or structured inputs depending on the tool.
Output: Live result + Copy; The result area focuses on usable output, with copy, download, or preview actions when supported.
Privacy: Browser-side processing; The main tool logic does not call an external API, so inputs normally stay in the current tab.
Save / share: Shareable URL state; Key settings are encoded in the URL so another person can reopen the same setup.
Performance budget: Initial JS <= 9 KB; No WASM budget is declared, keeping the tool quick to open on mobile.
Best fit: Calculator · Finance; Category and role tags drive related tools, internal links, and quick fit checks.

How to use

1. Input

Paste or drop your content into the tool panel.
2. Process

Click the button. All processing is local in your browser.
3. Copy / Download

Copy the result or download to disk in one click.

How Cap Rate Calculator fits into your work

Use it for fast estimates, comparisons, and planning numbers before you make the final call.

Calculation jobs

Getting a realistic range before a purchase, plan, workout, or schedule decision.
Comparing scenarios by changing one input at a time.
Turning rough assumptions into a number you can discuss.

Calculation checks

Double-check units, dates, rates, and rounding assumptions.
Treat health, finance, tax, and legal outputs as planning aids, not professional advice.
Save the inputs that produced an important result so you can reproduce it later.

Good next steps

These links move the current task into a more complete workflow.

Real-world use cases

Screen a rental listing before you tour it
A listing shows asking price and the agent quotes a rent. Punch in the rent as annual gross income, estimate expenses at a third of rent if you have nothing better, and read the cap rate in seconds. If a 500,000 duplex pencils out at 3 percent while everything else in town is 6 to 7, you know to skip the tour and spend the Saturday on a listing that clears your bar.
Back into the most you should offer
You know the NOI from the seller's operating statement and you will not buy below a 6.5 percent return. Switch to the value mode, type the NOI and 6.5, and the tool hands you the ceiling price. Offer at or under it and your return is protected no matter how the seller framed the asking number.
Set a rent target for a flip-to-rent property
You are buying at a fixed price and need to know what NOI the building must throw off to be worth it. Use the NOI mode, enter the purchase price and your required cap rate, and the tool returns the NOI you have to hit. Subtract your expense estimate from that and you have the gross rent the renovation has to support.
Compare a portfolio of candidate deals on one ruler
Three buildings, three prices, three rent rolls. Cap rate puts them on a single axis so a cheaper building with thin rent and a pricier one with strong rent can be ranked honestly. Copy each result, paste them into one note, and the highest-and-safest cap rate is the one to push on.

Common pitfalls

Putting the mortgage payment into operating expenses. Cap rate is an unleveraged measure, so debt service is excluded by design. Add your loan back in and the NOI shrinks and the cap rate looks far worse than the property really earns.
Using monthly figures in fields that expect annual ones. Cap rate runs on yearly rent and yearly expenses. Feed it one month of rent against a full price and the cap rate comes out twelve times too small. Multiply rent and costs by twelve first.
Forgetting a vacancy and a maintenance allowance. A property that is "fully rented today" still needs a few percent set aside for empty months and repairs. Leave them out and the NOI is inflated, so the cap rate flatters the deal and the real return disappoints later.

Privacy

Every step — NOI, the cap rate, the reverse solve for price or NOI, and the gross rent multiplier — is plain JavaScript running in your browser tab. No rent, expense or price ever leaves the page, and nothing about the property is logged. The one caveat: the shareable link encodes your numbers in the query string, so a "share link" pasted into chat will record them in the recipient server's access log. For a confidential deal, use the copy button and paste the text instead of sharing the URL.

FAQ

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Cap Rate Calculator — NOI, Capitalization Rate and Property Value

What this tool does

Tool details

How to use

1. Input

2. Process

3. Copy / Download

How Cap Rate Calculator fits into your work

Calculation jobs

Calculation checks

Good next steps

Real-world use cases

Screen a rental listing before you tour it

Back into the most you should offer

Set a rent target for a flip-to-rent property

Compare a portfolio of candidate deals on one ruler

Common pitfalls

Privacy

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