Cap Rate Calculator

Capitalization rate measures the unlevered return on a property relative to its purchase price. It's the fastest way to compare deals across markets, property types, and price points.

Property
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$

Total rent collected per year before any deductions

5%
Annual Operating Expenses

Do not include mortgage payments — cap rate measures unlevered return.

$
$
$
$

Typically 8-10% of gross rent

$

Results

Cap Rate

0.00%

Effective Gross Income$0
Total Operating Expenses($0)
Net Operating Income (NOI)$0
Expense Ratio0.0%

Cap Rate = NOI / Purchase Price × 100

How to Use the Cap Rate Calculator

1. Enter the purchase price — the total acquisition cost of the property (or current market value if you already own it).

2. Enter annual gross rent — the total rent you expect to collect each year before any deductions.

3. Adjust the vacancy rate — 5% is a reasonable default for stable markets, but adjust up for higher-risk areas or turnover-heavy properties.

4. Enter operating expenses — property taxes, insurance, maintenance, and management fees. Do not include mortgage payments — cap rate measures the property's return before financing.

What Is a Good Cap Rate?

There's no single “good” cap rate — it depends on your strategy, market, and risk tolerance:

Cap RateTypical MarketInvestor Profile
3-5%Gateway cities (SF, NYC, LA)Appreciation-focused, lower risk
5-7%Secondary markets, suburbsBalanced cash flow + growth
7-10%Midwest, South, tertiary marketsCash-flow focused
10%+High-risk or distressed areasExperienced investors, value-add

Cap Rate vs. Cash-on-Cash Return

Cap rate and cash-on-cash return are both essential metrics, but they measure different things:

  • Cap rate ignores financing. It tells you how the property performs regardless of how you pay for it.
  • Cash-on-cash return factors in your mortgage. It tells you how your invested cash is performing.

Use cap rate to compare properties. Use cash-on-cash to evaluate how a specific deal works with your financing.