Simple Cap Rate Calculator
Calculate the capitalization rate for a rental property using income and operating expenses.
Property
The current market value or purchase price of the property. Used as the denominator in the cap rate calculation.
Income
Gross monthly rental income. Assumes full rent before vacancies or expenses.
Percentage of gross rent paid to a property management company. Set to 0% if self-managing.
Expected percentage of rental income lost to vacancies. Accounts for time the unit is not rented.
Yearly Expenses
Annual property tax expense.
Annual insurance expense.
Annual HOA fees (if applicable).
Annual maintenance and repairs expense.
Any additional annual operating expenses. Examples include utilities, licensing, or miscellaneous fees.
Deal Analysis
The capitalization rate for the property. Calculated as net operating income divided by property value.
Annual income after all operating expenses (excluding debt service).
Annual Breakdown
The cap rate tells you what return you'd get if you bought the property with all cash. It's a quick way to compare rental properties.
About this calculator
This Simple Cap Rate Calculator estimates the capitalization rate for a rental property based on rental income and operating expenses.
Cap rate is a commonly used metric in real estate investing that helps compare the potential return of different properties, independent of financing. This calculator focuses on operating performance, not loan structure.
Use this tool for quick deal screening and side-by-side property comparison.
What each input means
- Property market value is the current market value or purchase price of the property. It’s used as the denominator in the cap rate calculation.
- Monthly rent is gross monthly rental income, assuming full rent before vacancies or expenses.
- Property management fee (%) is the percentage of gross rent paid to a property management company. Set to 0% if self-managing.
- Vacancy rate (%) is the expected percentage of rental income lost to vacancies. It accounts for time the unit is not rented.
- Property taxes is the annual property tax expense.
- Insurance is the annual property insurance cost.
- HOA fees is annual homeowners association fees, if applicable.
- Maintenance is annual maintenance and repair expenses.
- Other costs is any additional annual operating expenses. Examples include utilities, licensing, or miscellaneous fees.
How does cap rate work?
The capitalization rate, or cap rate, measures a property’s annual return assuming it is purchased with cash.
It is calculated using the formula: Cap Rate = Net Operating Income (NOI) ÷ Property Value.
Net operating income is the property’s annual rental income minus operating expenses such as taxes, insurance, maintenance, and management fees. Mortgage payments and financing costs are intentionally excluded.
Cap rate allows investors to compare rental properties across markets, evaluate income potential independent of financing, and quickly screen deals before deeper analysis.
Higher cap rates generally indicate higher potential return but may also reflect higher risk or less desirable locations.
Key levers that influence cap rate
- Rental income – Higher rent increases NOI and cap rate.
- Operating expenses – Lower expenses improve NOI and cap rate.
- Vacancy rate – Higher vacancy reduces effective income.
- Property value – Higher purchase prices lower cap rate for the same income.
Key assumptions & limitations
- No financing – Financing and mortgage payments are not included.
- No tax or appreciation modeling – Taxes, depreciation, and appreciation are not modeled.
- Stable inputs – Assumes stable income and expenses.
- No growth assumptions – Does not account for future rent growth or value changes.
- Estimates only – Results are estimates, not investment advice.
This calculator is designed for quick analysis, not full real estate underwriting.