Cap Rate Calculator
Calculate a property capitalization rate from rental income, vacancy, operating expenses, and property value.
How this calculator works
How to use this calculator
Enter annual gross rental income, vacancy rate, annual operating expenses, and property value. The calculator estimates net operating income and cap rate.
Formula used
Effective Rental Income = Gross Rental Income × (1 − Vacancy Rate). Net Operating Income = Effective Rental Income − Operating Expenses. Cap Rate = Net Operating Income ÷ Property Value × 100.
Example calculation
For $36,000 annual rent, 5% vacancy, $12,000 operating expenses, and a $400,000 property value, estimated NOI is $22,200 and cap rate is 5.55%.
What the result means
Cap rate estimates a property’s unlevered income yield based on NOI and property value. It does not include mortgage payments, financing costs, taxes on income, appreciation, or selling costs.
Frequently asked questions
Does cap rate include mortgage payments?
No. Cap rate typically uses NOI before debt service.
Is a higher cap rate always better?
Not always. Higher cap rates can also reflect higher risk, weaker markets, or lower expected growth.
Should I include repairs in operating expenses?
Regular operating repairs are usually included. Major capital improvements are often analyzed separately.