Rental property cap rate calculator

To calculate cap rate on a rental property, subtract annual operating expenses from annual gross rent to get net operating income (NOI). Divide NOI by the purchase price, then multiply by 100. For example, $18,000 in NOI on a $300,000 property produces a 6% cap rate. Use the calculator above to keep rent, vacancy, management, maintenance, tax, and insurance in the same equation.

Cap rate is net operating income divided by purchase price, shown as a percent. It ignores your loan, so two buyers with different leverage can still compare the same asset. A higher cap rate usually means more unlevered yield and often more risk, location friction, or deferred maintenance. A low cap rate in a dense job market can still be a hold if you believe in rent growth; it is not automatically a pass.

This page uses market-style NOI: annual rent minus vacancy, management, maintenance, tax, and insurance. Mortgage payment is calculated so you can see cash flow too, but cap rate itself does not use debt service. Change price or rent and watch the rate move before you chase the address. If cap rate only looks acceptable after you drop vacancy to zero, you are not measuring the listing—you are measuring hope.

Use cap rate to rank ZIP-level listings, then confirm DSCR and cash-on-cash with your actual down payment. Unlevered yield answers “is the asset cheap relative to income?” Levered metrics answer “does my loan and my cash still work?” You need both. When a deal clears your hurdle, save it in Rental Prop Finder so the same math sits on the live listing instead of a throwaway tab.

Other tools: DSCR calculator · Cash-on-cash calculator · Cash flow calculator · Rental property calculator

Go deeper: rental property analysis software · how to find rental investment properties