Cap Rate Calculator
Net operating income ÷ price — the language of income-property valuation, with NOI built correctly.
Formula
Disclaimer: Indicative math — lender policies, state charges and market rents vary. Verify locally; not financial advice.
Disclaimer: This tool is for general informational and estimation purposes only and is not professional financial, tax, accounting or legal advice. All figures are estimates — verify with a qualified professional before making decisions. Read the full disclaimer.
Need cap rate calculator results fast? Skip the spreadsheet and get a clear, defensible answer in one step — free, private and instant, recalculating live as you change any input.
About Cap Rate Calculator
Cap rate is how income property talks about price: net operating income divided by value, deliberately EXCLUDING the mortgage — it measures the asset, not your financing of it. The defaults ($400k duplex, $3,200 rent, 5% vacancy, 38% expenses) produce a 5.4% cap: the unlevered return the building itself generates, comparable across deals, cities and against bonds. The two professional uses: COMPARISON (a 5.4% cap in a stable suburb versus 7.5% in a rougher zip code prices the risk difference exactly like bond spreads — caps compress for quality and growth, expand for risk and stagnation) and VALUATION (value = NOI ÷ market cap — the 'valueAt6' output shows what your NOI is worth at a 6% market cap, the math behind every commercial appraisal and every 'forced appreciation' play: add $100/month of NOI at a 6% cap and you created $20,000 of value). NOI hygiene decides whether your cap is real: include property management even if self-managing (your time isn't free, and buyers will), reserve for capex (roof/HVAC sinking funds — the line amateur NOIs omit), use ACTUAL taxes post-purchase (reassessment jumps bite), and never let a seller's 'pro-forma' NOI (fantasy rents, zero vacancy) anchor your price. The 50% rule (expenses ≈ half of gross on older small multifamily) is the cynic's check on any glossy listing.
How to use Cap Rate Calculator
- 1Enter Property price, Gross monthly rent, Vacancy & credit loss (%), Operating expenses (% of gross) into the Cap Rate Calculator.
- 2The result is computed automatically using Cap rate = NOI ÷ price ; NOI = gross rent − vacancy − operating expenses (mortgage EXCLUDED — that's the point) — there is no button to press; it updates live as you type.
- 3Change any input to model a different scenario, then use “Copy result link” to share the exact numbers.
Why use Cap Rate Calculator?
- ✓Computes cap rate calculator instantly with the correct formula — no spreadsheet needed
- ✓100% free and unlimited, with no sign-up, login or paywall
- ✓Runs entirely in your browser, so the figures you enter are never uploaded or stored
- ✓Shows the formula, a live worked example and references so you can defend the number
Frequently asked questions
What's a good cap rate?+
Context-priced: 4-5% = prime/stable (appreciation markets), 6-8% = solid cash-flow territory, 9%+ = priced for risk (declining area, deferred maintenance, tenant quality). Compare against your alternatives: a 5% cap with 3% rent growth beats a static 7% over a decade. The wrong question is 'high or low' — the right one is 'is the risk priced?'
Cap rate vs cash-on-cash — kya farak hai?+
Cap rate building ka return hai (mortgage ko ignore karke) — asset comparison ke liye. Cash-on-cash AAPKA return hai (down payment par, financing ke baad) — personal decision ke liye. 5.4% cap wali property 6.6% ke loan par negative leverage hai (cash-on-cash cap se neeche girega); 7%+ cap par positive. Dono calculators side-by-side chalaiye — gap hi leverage ka verdict hai.
Why exclude the mortgage from NOI?+
So the number describes the ASSET, not the buyer: two investors with different loans see the same building's same NOI and cap — enabling comparison, appraisal and the value = NOI ÷ cap formula lenders underwrite against. Your financing shows up one level down, in cash-on-cash and DSCR. Mixing them is the classic amateur-spreadsheet error.
Seller ki pro-forma NOI par kaise sawaal uthayein?+
Teen documents maango: trailing-12 actuals (T12), current rent roll, aur tax/insurance ke asli bills. Pro-forma 'market rent' vs actual rent ka gap, zero-vacancy assumptions, aur management/capex lines ka gayab hona — yeh teen jagah fantasy chhipti hai. Underwriting hamesha ACTUALS par; upside ko price me nahi, apne plan me rakho.
Related Finance tools
Human Life Value (HLV) Calculator
The economic value of your future earnings to your family — the income-replacement basis for sizing a life-insurance cover.
● LiveTerm Life Insurance Coverage Calculator
How much term-life cover you actually need — replacing income, clearing debts and funding goals, net of existing assets and cover.
● LiveDIME Method Life Insurance Calculator
The DIME formula — Debt + Income + Mortgage + Education — a fast, complete way to size a life-insurance cover.
● Live