Cap rate calculator
Enter rent, vacancy and operating expenses to get the net operating income. Divide by the price for the cap rate, or by a target cap rate for the price that makes the numbers work.
Leave out mortgage principal and interest, depreciation, capital improvements and income taxes: they aren't operating expenses.
Value of this NOI at other cap rates
| Cap rate | Value |
|---|
Estimate only. A cap rate is only as good as the income and expenses behind it: use market rent, a realistic vacancy rate and the full year's costs. It ignores financing; see the cash-on-cash return calculator for a deal with a loan.
Cap rate is net operating income divided by the price. NOI is rent less vacancy, plus other income, minus operating expenses, before any loan payments. A rental with $36,000 of rent, 5% vacancy and $10,836 of expenses has $23,364 of NOI; at $400,000 that's a 5.84% cap rate, and a 6% cap rate implies $389,400.
How to use the cap rate calculator
Enter the income
Monthly rent, any other income and a vacancy and credit loss rate.
Add operating expenses
Taxes, insurance, management, repairs, reserves and other costs, without loan payments.
Find the rate or price
Divide by the price for the cap rate, or by a target cap rate for the price.
What the cap rate calculator covers
Two directions
Cap rate from a price, or the price at a target cap rate.
NOI worksheet
Gross rent, vacancy, effective gross income, each expense and NOI.
Management as a percentage
Figured on effective gross income, the way most managers bill.
Value grid
What the same NOI is worth at cap rates two points either side.
No financing mixed in
Debt service stays out of NOI, so deals compare on the property alone.
- Formula
- Cap rate = NOI ÷ price; price = NOI ÷ cap rate
- NOI
- Rent − vacancy + other income − operating expenses (no principal, interest, depreciation or income tax)
- Inputs
- Rent, other income, vacancy %, taxes, insurance, management %, repairs, reserve, other
- Cost and privacy
- Free, no sign-up; runs in your browser
Questions about the cap rate calculator
How do you calculate a cap rate?
Divide the property's yearly net operating income by its price or value. $23,364 of NOI on a $400,000 property is a 5.84% cap rate. To find a value, divide NOI by the cap rate: $23,364 ÷ 6% is $389,400.
What is net operating income?
Income from the property minus the costs of running it. The OCC's handbook defines NOI as annual gross income less operating expenses, and operating expenses leave out interest, principal and income taxes but include a reserve for replacing capital items.
Should mortgage payments be in the cap rate?
No. The cap rate measures the property, not the financing, so the loan payment stays out of NOI. Use the cash-on-cash return calculator to see the return on a financed purchase.
What is a good cap rate?
It depends on the market, property type, condition and interest rates. A higher cap rate means more income per dollar of price but usually more risk. Compare with recent sales of similar properties nearby.
Why include vacancy if the unit is rented?
Leases end and tenants miss payments. A vacancy and credit loss allowance gives a NOI you can expect over time, not just in a fully rented month.
Can Closingbird manage investment property purchases?
Yes. Closingbird tracks the contract deadlines, documents and parties on any purchase, and the 1031 exchange deadline calculator helps when the buyer is exchanging.
Guides and features for this step of the deal
Where the rules come from
Let Closingbird keep every date for you
Closingbird reads the executed contract, fills in every deadline, party and amount, and reminds each deadline owner before the date. Calendar or business days, with weekends and US federal holidays skipped.
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