What is the Cap Rate Calculator?
The Cap Rate Calculator estimates a property’s net operating income before debt service and divides that NOI by the property value or purchase price entered. This creates a financing-independent yield measure for comparing property operations.
How does the Cap Rate Calculator work?
Gross scheduled rent is reduced by the vacancy percentage, other property income is added, and annual operating expenses are subtracted. Mortgage principal and interest are intentionally excluded from NOI and cap rate.
What formula or rule does it use?
NOI = effective rental income + other income − operating expenses; cap rate = NOI ÷ property value × 100 The dynamic “How this answer was calculated” panel substitutes the values you enter into the rule after a valid calculation.
How should you use this calculator?
Use realistic rent, vacancy and operating expenses. For leveraged cash flow, move to the Rental Property Calculator or Cash-on-Cash Return Calculator. Use the Property Tax Calculator for local tax estimates and the Mortgage Calculator for debt service.
How should you understand the result?
The main result is cap rate. NOI is also shown in dollars. A higher or lower cap rate is not automatically better because property condition, location, growth expectations, risk, financing and strategy differ.
What are the limitations?
Cap rate is a simplified snapshot and does not include debt service, income tax, depreciation, appreciation, capital gains, future rent growth or major capital expenditures unless those are represented in your operating-expense input.
Who can use this calculator?
Useful for landlords and real-estate investors comparing income-producing properties on an unleveraged operating basis.
Frequently asked questions about Cap Rate
Sources and methodology
Methodology, terminology and consumer guidance are grounded in the following U.S. government or housing-finance references where applicable.