Cap rate calculator
Enter the property value, the rent, vacancy and operating expenses to see net operating income (NOI) and the capitalization rate, for your review of an investment property file.
Runs in your browser. What you type isn't sent or stored.
Calculate cap rate
Property
Rent and expenses
Optional. There is no default.
Taxes, insurance, repairs, management. Not the mortgage.
How cap rate is calculated
Net operating income (NOI) = annual gross rent − vacancy − annual operating expenses. Cap rate = NOI ÷ property value, as a percent.
Mortgage payments aren't operating expenses, so cap rate is the same whether the property is financed or bought with cash.
Worked example
- Rent $3,000 a month: $36,000 a year.
- 5% vacancy entered: $36,000 − $1,800 = $34,200.
- Operating expenses $10,200 a year: NOI $24,000.
- Value $400,000: $24,000 ÷ $400,000 = 6.00% cap rate.
Round numbers for illustration only; the vacancy and expenses are inputs, not defaults.
What this calculator doesn't do
- It doesn't value the property or say what cap rate a market or lender looks for.
- It sets no vacancy or expense figure. Every figure is the one you type.
- It doesn't make a lending decision.
Questions
How is cap rate calculated?
Cap rate = net operating income ÷ property value, as a percent. NOI = rent − vacancy − operating expenses, all annual. Debt service isn't part of NOI.
What goes into operating expenses?
The annual costs of running the property, for example taxes, insurance, repairs, management, utilities the owner pays and HOA dues. Mortgage principal and interest are left out.
Should I use the purchase price or the current value?
Either. Enter the figure you want the rate on: the price for a purchase, or a current value or appraisal for a property already owned.
How is vacancy applied?
The vacancy percent you enter is taken off the gross rent before expenses. Leave it blank or enter 0 to skip it. The calculator has no default.
How is cap rate different from cash on cash return?
Cap rate ignores financing. Cash on cash return takes the cash flow after the mortgage payment and divides it by the cash you put in. Use the cash on cash return calculator for that.
Is anything I type saved?
No. The figures are calculated in your browser, and what you type isn't sent or stored.
Not legal or tax advice.
Ready for the real statements?
Upload 12 or 24 months of PDFs. StatementReady checks whether each statement's transactions add up to its printed balances.
This tool assists your review of the loan file. The lender makes all underwriting decisions.
StatementReady isn't affiliated with or endorsed by Fannie Mae or any lender named here.