Cap Rate Calculator

How this calculator works

Cap rate is NOI divided by price. It describes the property's return before financing, so it lets you compare properties regardless of how they are financed. Gross rent multiplier (price ÷ gross rent) is a quicker but rougher screen.

NOI = gross rent − vacancy − operating expenses (no loan payments, no capital reserves).
Implied value = NOI ÷ the cap rate you enter.

Worked example

Example values are illustrative, not quotes or market data. These are the numbers the calculator above starts with.

Inputs

Price or value: $500,000
Gross scheduled rent per year: $60,000
Vacancy and credit loss: 5%
Operating expenses per year (no loan payments): $21,000

Results

NOI: $36,000
Cap rate: 7.20%
GRM: 8.33

Common questions

Does cap rate include the mortgage?

No. It is measured before financing. Use the rental cash flow calculator for returns after the loan.

Where do I get a market cap rate?

From recent sales of similar properties. A commercial broker or appraiser can help.

Why does NOI exclude reserves?

By convention NOI covers operating expenses only. Reserves and capital items are treated separately.

Related calculators

Estimate only. Actual loan terms, eligibility, insurance, taxes, and settlement charges require verification. These are planning estimates, not a lender Loan Estimate, Closing Disclosure, appraisal, or approval. Michael O'Neal is a real estate broker, not a lender, appraiser, attorney or tax adviser.