Cap rate calculator
Cap rate is the yearly profit a property makes before the mortgage, as a share of its price. It lets you compare properties as if you'd paid cash, so financing doesn't hide a bad price.
Formula
Cap rate = net operating income (NOI) ÷ purchase price × 100
NOI = yearly rent collected minus operating costs, not counting the mortgage.
Example: A $280,000 rental with $22,800 of NOI has a cap rate of about 8.1%. At $350,000 with the same NOI, it drops to 6.5%.
Quick check
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Cap rate
8.14%
Verdict
Looks like a good deal
Rent covers every cost with money left over each month.
- Cash flow
- $445/mo
- Cap rate
- 8.14%
- DSCR
- 1.31
Quick estimate with typical costs: property tax 1.2%/yr, insurance 0.5%/yr, 5% vacancy, 10% of rent for repairs, 30-yr loan. The full analysis uses your real numbers, adds a stress test and an AI report.
What counts as good?
Under 4%
Priced for appreciation, not income. Usually negative cash flow with a loan.
4–6%
Typical in expensive, stable markets.
6–8%
Solid income for most single-family and small multifamily.
8%+
High yield — often with more risk (location, condition, tenant turnover).
Questions investors ask
What is a good cap rate?
For residential rentals, 5–8% is common. Higher is better for income but often comes with more risk. Compare against similar properties in the same area rather than a universal number.
Does cap rate include the mortgage?
No. Cap rate ignores financing on purpose, so it measures the property itself. Use cash flow, cash-on-cash return and DSCR to see how the loan changes the picture.
Why is my cap rate lower than the listing says?
Listings often leave out vacancy, repairs or management. Add realistic costs and the cap rate usually falls by one to two points.
Need the full picture?
Your real costs, closing and rehab, a ⚡ stress test and an AI investment report.
More calculators: Rental property · DSCR · Cash-on-cash return