INVESTUSCA / TOOLS / CAP RATE CALCULATOR
Cap Rate Calculator for Rental Properties
Estimate net operating income and unlevered yield from purchase price, rent, vacancy, and operating expense assumptions—then see which inputs are doing the work.
INPUTS
Make the assumptions explicit.
Acquisition & income
Annual operating expenses
Enter annual expenses as dollar amounts. If an expense is already included in your management or HOA assumption, do not enter it twice.
LIVE OUTPUT
Unlevered property screen
Estimated cap rate
5.08%
NOI ÷ purchase price. Financing is not included.
Net operating income
$25,380
Effective gross income
$39,900
Operating expenses
$14,520
Gross rent yield
8.4%
Operating expense ratio
36.39%
Operating break-even occupancy
34.57%
Gross potential income: $42,000
Vacancy & credit loss: $2,100
A cap rate is a screening metric. It is not a promised return and does not include debt service, closing costs, income taxes, depreciation, appreciation, or selling costs.
THE FORMULA
Simple math. Visible assumptions.
Effective gross income = gross potential income − vacancy loss
NOI = effective gross income − operating expenses
Cap rate = NOI ÷ purchase price
WHAT THIS TOOL IS FOR
A first screen before a full underwriting model
Use cap rate to compare unlevered property economics under a consistent set of assumptions. It helps you ask whether the asking price is supported by the property’s operating income, but it cannot tell you whether the property fits your financing, tax position, risk tolerance, or investment plan.
LIMITATIONS
What the cap rate does not answer
Financing
Mortgage rate, leverage, amortization, and debt service belong in a cash-flow or cash-on-cash model.
Closing and selling costs
Transaction costs can change your basis and exit proceeds even when NOI stays unchanged.
Taxes and depreciation
Income-tax outcomes depend on the owner, entity, jurisdiction, and tax strategy.
Future performance
The calculator describes the assumptions entered; it does not forecast rent growth, appreciation, or vacancy.
CAP RATE FAQ
Questions investors usually ask next
What is a cap rate?
Cap rate is net operating income divided by the property purchase price. It is an unlevered screening metric, so this calculator does not include mortgage payments or other financing effects.
What expenses should be included in a cap rate calculation?
Include recurring operating expenses such as property tax, insurance, HOA, maintenance, management, utilities paid by the owner, and other operating costs. Keep mortgage principal and interest outside NOI.
Is cap rate the same as cash-on-cash return?
No. Cap rate compares NOI with the purchase price and ignores financing. Cash-on-cash return compares cash flow after financing with the cash invested, so the two metrics answer different questions.
Does a higher cap rate always mean a better investment?
No. A higher cap rate may reflect more operating, tenant, property-condition, market, or liquidity risk. Compare the assumptions, property quality, location, financing, and downside case before making a decision.
NEXT STEP
A cap rate is the beginning of the conversation.
Compare the screen with a market context page before you decide which property assumptions deserve deeper work.