Cap Rate Calculator
Enter the purchase price, rent, vacancy allowance and annual operating expenses to get net operating income and cap rate instantly. No signup — the numbers update as you type.
Same conventions as the full DealQuanta engine — computed from the numbers you enter, not market data. Not financial advice.
Run the full free analysis — Score, cash flow, all metrics →The cap rate formula
Net operating income (NOI) is the property's annual income after vacancy and all operating expenses — but before the mortgage payment. That makes cap rate a financing-independent yardstick: it tells you what the property itself earns per dollar of price, regardless of how any particular buyer finances it. This calculator uses the standard conventions: the vacancy allowance is taken on gross scheduled rent, and the denominator is the purchase price.
Worked example
A $250,000 property rents for $2,100/month with a 5% vacancy allowance and $9,600/year of operating expenses:
- Gross scheduled rent: $2,100 × 12 = $25,200
- Vacancy loss: $25,200 × 5% = $1,260
- NOI: $25,200 − $1,260 − $9,600 = $14,340
- Cap rate: $14,340 ÷ $250,000 × 100 = 5.74%
Plug the same numbers into the calculator above — they're the defaults — and you get the same result. The math is identical to the tested DealQuanta engine.
How to read a cap rate
Cap rate answers “how hard does the price work?” — it says nothing about your loan or your cash flow. A 5.7% cap rate can be a strong deal in a market where similar properties trade at 5%, and a weak one where they trade at 7%. Because it ignores financing, pair it with cash-on-cash return (your levered return) and DSCR (whether the income covers the debt). The differences are covered in depth in cap rate vs cash-on-cash.
FAQ
- What is a good cap rate for a rental property?
- It depends on the market and the asset. Cap rates in most US residential markets have typically ranged from roughly 4% in expensive coastal metros to 8%+ in lower-priced Midwest and Southern markets. A higher cap rate means more income per dollar of price, but it usually comes with more perceived risk (location, tenant base, property condition). Compare a deal's cap rate to similar properties in the same market, not to a universal number.
- Does the cap rate include the mortgage payment?
- No. Cap rate is a financing-independent metric: NOI excludes debt service by definition, so two buyers with different loans see the same cap rate on the same property. To measure the return on your actual cash with financing included, use cash-on-cash return.
- Is cap rate calculated on purchase price or market value?
- This calculator uses purchase price — the standard when evaluating an acquisition, and the same convention as the full DealQuanta engine. Appraisers valuing a property you already own may capitalize NOI at a market cap rate instead (value = NOI ÷ cap rate).
- What counts as operating expenses?
- Property tax, insurance, management, maintenance, CapEx reserves, HOA dues, utilities you pay, and similar recurring costs — but never the mortgage payment, and vacancy is handled as an income deduction rather than an expense.
One metric never decides a deal
The full free calculator runs this metric alongside cash flow, cap rate, cash-on-cash, DSCR and an A–F score — no signup. DealQuanta Pro adds the 10-year pro forma with IRR, side-by-side comparison and client-ready PDF reports.