Finance category
Mortgage, loan, investing, tax, and money calculators.
Cap Rate Calculator
Compare investment properties on income performance using cap rate, net operating income, and operating expense ratio — without letting financing distort the numbers.
Cap rate
5.77%
Annual NOI
$25,980
Effective gross income
$37,380
Operating expense ratio
30.5%
What the cap rate is telling you
Cap rate is in the typical range many investors target for stabilized rentals in stronger markets.
Annual operating expenses
$11,400
Implied price at this cap rate
$450,000
Cap rate is calculated as net operating income divided by property value, expressed as a percentage. It excludes financing because it is meant to compare property income performance independent of how each deal is financed.
How to Use
- Enter the property value or asking price you want to test.
- Add monthly rent, any other income such as parking or laundry, and a realistic vacancy rate.
- Enter the recurring monthly operating expenses for taxes, insurance, repairs, management, and reserves.
- Review cap rate, NOI, effective gross income, and the operating expense ratio to compare the deal against other properties.
Frequently Asked Questions
What is a good cap rate?
There is no universal good cap rate. Stronger urban markets often trade at lower cap rates because investors expect appreciation. Secondary markets and properties with more management work usually need higher cap rates to be worth pursuing.
Why does cap rate exclude financing?
Cap rate is meant to compare the income performance of properties independent of how each one is financed. Two investors paying cash and using a 30-year loan should still see the same property cap rate.
Should I include the mortgage payment in NOI?
No. NOI excludes financing, depreciation, and income taxes. Loan payments affect cash flow and cash-on-cash return, but not NOI or cap rate.
What is the operating expense ratio?
Operating expense ratio compares operating expenses with effective gross income. Many small residential rentals run a 35–55% ratio depending on age, condition, and what utilities the owner pays.
How does cap rate compare with cash-on-cash return?
Cap rate measures property income performance. Cash-on-cash return measures how the cash you actually invested is performing once financing is layered on. Use both together when comparing leveraged deals.
Related Calculators
Rent Roll Calculator
Build the rent roll that drives effective gross income into this cap rate.
Cash-on-Cash Return Calculator
Layer financing onto the deal and see what the cash you put in is actually earning.
Rental Cash Flow Calculator
Build a full monthly cash flow with detailed expenses, vacancy, and debt service.
DSCR Calculator
Translate NOI into the debt service coverage ratio lenders use to size investor loans.
1031 Exchange Calculator
If selling this property, model the tax deferred by swapping into a like-kind replacement.
Property Management Fee Calculator
Budget full management cost so operating expenses in the cap rate are realistic.
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