How it works
How this tool works.
Cap rate is the number investors reach for first, because it measures the property on its own — what it earns relative to its price, before financing muddies the picture. It’s how you line up two very different deals and compare them fairly.
Enter the purchase price, annual rental income, and annual operating expenses, and this calculator estimates the cap rate along with the net operating income (NOI) it’s built from. It’s arithmetic on the figures you provide — an illustration to compare deals, not a valuation or a prediction of returns.
Enter the purchase price, the annual rental income (monthly rent × 12), and the annual operating expenses.
Operating expenses exclude the mortgage — cap rate measures the property, not your financing — so include taxes, insurance, management, repairs, and vacancy, but not loan payments.
The tool computes net operating income (income − expenses), then divides by the price and multiplies by 100 for the cap rate.
Both NOI and cap rate are estimates from your inputs; the calculator guards against dividing by a zero price.
Make the result useful
Cap-rate underwriting
Price is the property value or purchase denominator.
NOI is income after recurring operating expenses but before loan debt service.
Effective income should reflect a defensible vacancy and concession assumption.
Capital projects and financing should be modeled separately from recurring NOI.
The assumptions that move this result
Price
Property value denominator.
NOI
Annual operating income before financing.
Income
Effective annual income after leakage.
Expenses
Recurring operating costs only.
cap rate = annual NOI ÷ price
Use the output as a documented scenario result, not a guarantee.
Read the number in context
Worked scenario
Scenario: $30,000 NOI on $400,000 price is 7.5% cap rate.
Edge case
Edge case: subtracting mortgage payment would understate NOI and distort cap rate.
Does not show borrower cash flow, loan terms, or value changes.
Before you act
• Verify every recurring expense.
• Keep debt service out of NOI.
• Compare similar properties on the same income basis.
Worked formula
cap rate = annual NOI ÷ price
Is this a forecast?
No. It calculates the assumptions you enter.
Can it replace professional review?
No. Use current records and qualified advice.
What should I save?
Keep the assumptions and source records used for the decision.