Cap Rate Calculator
Calculate a rental property's capitalization rate from NOI and property value.
What is Cap Rate?
Capitalization rate ("cap rate") is a quick way real estate investors compare a rental property's income potential relative to its price, independent of financing — it answers "what return would this property generate if I bought it with all cash?"
The formula
NOI = Annual Gross Rental Income − Annual Operating Expenses. Cap Rate = NOI ÷ Property Value × 100.
How to use it
- Enter the property's annual gross rental income.
- Enter annual operating expenses (property tax, insurance, maintenance, management fees — not including mortgage payments, which cap rate deliberately excludes).
- Enter the property's value or purchase price.
Cap rate is a useful first-pass comparison between properties, but it ignores financing costs, appreciation, and tax effects entirely — a low cap rate in a fast-appreciating area can still outperform a high cap rate somewhere stagnant, so treat this as one input among several, not a complete investment analysis.
Want the "why" behind this tool? Read Why Cap Rate Deliberately Ignores Your Mortgage.