Cap Rate Calculator

Cap rate = net operating income (NOI) ÷ property value, expressed as a percent. NOI is your effective rental income (gross rent minus a vacancy allowance) minus operating expenses — taxes, insurance, maintenance, management — but not mortgage payments or income tax. A $28,000 NOI on a $400,000 property is a 7% cap rate.

It depends entirely on the market and risk. 4–5% is common in expensive, stable coastal cities; 8%+ shows up in higher-risk or slower-growth areas. A lower cap rate means you're paying more for each dollar of income (often for safety or growth); a higher one means more income per dollar (often with more risk). There's no universal 'good' number.

By design. Cap rate measures the property's return independent of how it's financed, so two investors with different loans can compare the same deal apples-to-apples. To factor in your specific mortgage and down payment, use cash-on-cash return instead.