Sample result
$21,564
$36,000 rent · 5% vacancy · $12,636 expenses
Calculator · rental investing
Cap rate calculator
Type the NOI and the price, or the cap rate you want. You get the cap rate or the max price, and the math behind it.
Cap rate
6.9%
$24,000 a year in NOI on a $350,000 price: a 6.9% cap rate.
- NOI per year
- $24,000
- NOI per month
- $2,000
- Price
- $350,000
- Reference band
- 6–8%
Cap rate leaves out the mortgage. The bands below are context, not advice.
The math
How it’s calculated
Your numbers, step by step. No mortgage payment appears anywhere: cap rate measures the property, not the loan.
- NOI $24,000 a year, as entered
- NOI ÷ price $24,000 ÷ $350,000 = 0.06857
- Cap rate 0.06857 × 100 = 6.9%, to one decimal
Reference bands
Where a cap rate usually sits
Rough ranges for US residential rentals, for context. What’s normal depends on the market, the building and interest rates at the time.
- Under 4% Yours Buyers are paying a lot for each dollar of income, usually for stability or expected growth: newer buildings, prime locations, high-cost metros.
- 4–6% Yours Common for stable, well-located property in large metros where demand is steady.
- 6–8% Yours Common for single-family rentals and small apartment buildings in many mid-size markets.
- Over 8% Yours More income for the price, which often comes with more risk or more work: older buildings, smaller markets, higher vacancy.
A cap rate at or below zero sits outside every band: the property doesn’t cover its own running costs at those numbers.
FAQ
Questions people ask
How do you calculate cap rate?
Divide the property’s net operating income (NOI) by its price or current value, then multiply by 100. Cap rate = NOI ÷ price × 100.
A rental with $24,000 a year of NOI priced at $350,000 has a 6.9% cap rate. To go the other way, divide NOI by the cap rate you want: at 6.5%, the same NOI supports a price of up to $369,230.
What counts as operating expenses?
The costs of running the property: property tax, insurance, repairs and maintenance, property management, utilities the owner pays, HOA dues, landscaping and the like, plus an allowance for vacancy.
Not included: mortgage principal and interest, depreciation, income taxes, and capital expenses such as a new roof or furnace. They matter for your return, but cap rate leaves them out on purpose so properties can be compared on their own.
What is a good cap rate?
There is no single good number. Cap rates move with the market, the kind of property, its condition and interest rates, and a higher cap rate means more income per dollar of price, not automatically a better deal.
As rough context: under 4% is typical of prime, stable property in high-cost cities; 4–6% of steady property in large metros; 6–8% of many single-family and small apartment rentals; over 8% often comes with more risk or more work. Compare against recent sales of similar property nearby.
What is the difference between cap rate and cash-on-cash return?
Cap rate compares NOI to the whole price, as if you paid cash. Cash-on-cash return compares your yearly cash flow after the mortgage to the cash you actually put in: down payment, closing costs and upfront repairs.
The same property has one cap rate but a different cash-on-cash return for every loan. Cap rate is for comparing properties; cash-on-cash is for judging your own deal.
Does cap rate include financing?
No. Cap rate ignores the mortgage entirely: no interest, no principal, no down payment. It measures the property, not the loan, so two buyers with different loans see the same cap rate.
Financing still matters to you. When the loan costs more than the cap rate, borrowing tends to shrink the return on your cash instead of growing it, so it is worth putting the two side by side before you buy.