Cap Rate Calculator
Estimate capitalization rate from property value, income, vacancy, and expenses.
What this tool does
Calculate an estimated capitalization rate from income, vacancy, expenses, and purchase price.
How to use
- Enter property value and gross income.
- Add vacancy percentage and operating expenses.
- Review NOI and the estimated cap rate result.
Formula
cap rate = net operating income ÷ property value
Examples
Sample rental property
Input: Value: 500000, Gross income: 60000, Vacancy: 5%, Expenses: 12000
Output: NOI: 45000, Cap rate: 9%
NOI = 60,000 - 3,000 vacancy - 12,000 expenses = 45,000.
Small duplex
Input: Value: 350000, Gross income: 42000, Vacancy: 8%, Expenses: 9000
Output: NOI: 29640, Cap rate: 8.47%
Vacancy loss of 8% reduces gross income before expenses.
Learn more
NOI vs cap rate
Net operating income (NOI) is the property's income after vacancy and operating expenses, before debt service and income taxes. Cap rate expresses that NOI as a percentage of property value: cap rate = NOI ÷ value.
Use NOI to understand cash flow from operations. Use cap rate to compare properties of different sizes on a relative yield basis.
What makes a cap rate good?
There is no universal good cap rate. Higher cap rates often reflect higher perceived risk, lower growth markets, or properties needing work. Lower cap rates may indicate stable income in strong locations.
Compare cap rates within the same market and asset class. For a full leveraged analysis including cash flow and DSCR, use the rental deal analyzer.
Assumptions
- Vacancy is applied as a percentage of gross income.
- Operating expenses are subtracted after vacancy.
- Output is an estimate only and not financial advice.
Common use cases
- Compare rental property returns
- Screen investment opportunities
- Estimate NOI and cap rate quickly
FAQ
How do you calculate cap rate?
Cap rate = Net Operating Income ÷ property value. Enter income, vacancy, expenses, and price to get both NOI and cap rate.
Is this financial advice?
No. This calculator provides a basic estimate for educational purposes only.
What is a good cap rate?
Cap rates vary by market, property type, and risk. Compare similar properties in the same market rather than using a single benchmark.
How is NOI calculated here?
NOI equals gross income minus vacancy loss minus operating expenses. Mortgage payments are not subtracted in this estimate.
Source notes
- Cap rate formula: Net Operating Income divided by property value or purchase price.
Explore related workflows
Related investment metrics
- NOI CalculatorCalculate net operating income from gross rent, vacancy, and expenses.
- DSCR CalculatorCalculate debt service coverage ratio for rental property loans.
- Cash-on-Cash Return CalculatorEstimate cash-on-cash return from annual cash flow and total cash invested.
- GRM CalculatorCalculate gross rent multiplier from property value and annual rent.
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Last reviewed: 2026-05-23