Real Estate Cap Rate Calculator – NOI and Cap Rate in 3 Easy Steps

Use this free real estate cap rate calculator to work out the capitalization rate and net operating income (NOI) of a rental property. Enter the purchase price, rent, vacancy and yearly expenses, and the tool shows your cap rate, NOI, effective gross income and total operating costs.

The cap rate is the quickest way to compare rental properties on equal terms. It shows the return the property itself produces, as if you paid all cash, so you can line up a duplex, a condo and a small apartment block side by side.

This real estate cap rate calculator handles the full NOI calculation, including vacancy, taxes, insurance, repairs, management and other costs, so you are not misled by the gross rent figure in a listing.

Cap Rate Formulas

• Effective Gross Income (EGI) = Gross rent × (1 − Vacancy %)
• Operating expenses = Taxes + Insurance + Maintenance + Management + Other
• NOI = EGI − Operating expenses
• Cap rate = NOI ÷ Property value × 100
• Property value from cap rate = NOI ÷ Cap rate

Mortgage principal and interest are not operating expenses, so they are left out of NOI. That keeps the cap rate independent of how the purchase is financed.

How to Use the Real Estate Cap Rate Calculator

Step 1: Enter the Price and Rental Income

Type the Property Value / Purchase Price ($300,000). Under Annual Income, enter the Gross Annual Rental Income ($30,000, or $2,500 a month) and a Vacancy & Credit Loss allowance (5%).

Step 2: Add the Annual Operating Expenses

Fill in Property Taxes ($3,000), Insurance ($1,200), Maintenance & Repairs ($1,500), Property Management ($2,400) and Other Expenses such as HOA fees or utilities ($900). Leave a field blank if it does not apply.

Step 3: Read the Cap Rate and NOI

Press Calculate Cap Rate. Effective gross income is $28,500, total expenses are $9,000, NOI is $19,500 and the cap rate is 6.50%.

Why Expenses Change the Picture

With the same $300,000 price and $30,000 rent, ignoring vacancy and expenses would suggest a 10% cap rate. Once 5% vacancy and $9,000 of costs are included, the real figure is 6.50%. Always check that a seller’s quoted cap rate uses realistic expenses.

What Is a Good Cap Rate?

There is no single right number. A higher cap rate means more income for the price, but often comes with more vacancy, repairs or location risk.

Using Cap Rate to Value a Property

Rearrange the formula to estimate a fair price. If similar buildings sell at a 7% cap rate and a property produces $19,500 NOI, its value is about $19,500 ÷ 0.07 = $278,571. If the asking price is $300,000, you are paying a premium compared with the market.

Cap Rate vs Cash-on-Cash Return

• Cap rate ignores financing and compares properties on an all-cash basis.
• Cash-on-cash return = yearly cash flow after mortgage ÷ cash you put in. It shows the return on your own money when you use a loan.
• ROI can also include appreciation and loan pay-down over time.

Tips for Accurate Results

• Use actual rent rolls and tax bills, not the listing’s pro forma numbers.
• Allow 5% to 10% for vacancy even in strong markets.
• Budget maintenance at around 1% of the property value per year for older buildings.
• Include management fees even if you plan to self-manage; your time has value.

This calculator is for education and quick comparisons. It is not investment advice; get professional input before buying property.

Related tools: the Rent vs Buy Calculator, the Mortgage Refinance Savings Calculator and the Net Worth Calculator.

Frequently Asked Questions