Cap Rate Calculator
Enter the purchase price, the yearly rent, a vacancy allowance and the yearly operating costs. The calculator shows the net operating income and the cap rate, the yearly return before any loan.
Cap rate
Cap rate-
Net operating income per year-
Rent collected after vacancy-
Gross rent multiplier-
An estimate for planning only, not financial advice or a loan offer.
How it works
Net operating income (NOI) is the rent you actually collect after vacancy, minus the costs of running the property such as taxes, insurance, repairs, management and utilities. Loan payments, depreciation and income tax are not part of NOI.
The cap rate is NOI divided by the price. A higher cap rate means a higher yearly return on the price but often more risk, so compare it with similar properties in the same area and with the cost of borrowing.
Find a property to run the numbers on
Questions
The capitalization rate is the net operating income of a property divided by its price or value. It shows the return you would get in a year if you bought the property with cash.
There is no single answer. It depends on the property type, the location, the tenants and the lease terms. Compare a property with similar ones nearby and with your cost of financing.
Property tax, insurance, repairs and maintenance, management, utilities the owner pays and similar running costs. Mortgage payments, depreciation and income tax are left out.
Units are rarely occupied all year. Allowing for some empty time gives a more realistic income than assuming every unit pays every month.