Free Cap Rate Calculator
Find a property's cap rate from its net operating income and price, or work backwards from a target cap rate to the price that hits it. Built for rental investors and landlords.
This free cap rate calculator divides annual net operating income by property price to get the cap rate, shows monthly NOI and the income multiple, and can work backwards from a target cap rate to the price that delivers it.
Rent minus operating expenses, before mortgage payments and taxes.
Purchase price, asking price, or current market value.
The yield you want. The calculator finds the price that produces it.
Estimates for screening deals, not investment advice. See Terms of Use.
What is a good cap rate?
A good cap rate is not a single number. It is shorthand for risk and return: the higher the rate, the more income you get per dollar of price, and usually the more risk you accept. Across the United States, most stabilized income properties trade somewhere between 5% and 10%. Prime coastal and urban buildings may trade at 4% to 5%, while similar buildings in smaller or riskier markets need 8% to 10% to attract a buyer.
Context decides what good means. A 4.5% cap rate on a newer apartment building in a growing city can be fine, because the buyer is paying for stability and expected rent growth. A 9% cap rate on an older property in a declining area is not automatically a bargain: the income may be shrinking, vacancies may be rising, and the building may need expensive repairs. The cap rate tells you the price of the income, not the quality of it.
Use the cap rate to compare similar properties, not different ones. Within one market and one property type, a higher cap rate usually means higher risk, and your job is to judge whether the extra yield pays for it. A cap rate is a snapshot: current NOI divided by current price. It says nothing about rent growth, financing costs, or how the deal performs after leverage.
As a quick screening rule, treat 6% to 8% as the healthy middle for residential rentals, look for 7% or more on small multifamily in average markets, and treat anything above 10% as a signal to dig into the numbers. Run the math above, then compare the result to recent sales of similar properties nearby.
Cap rate calculator questions
How do you calculate cap rate?
Divide the property's annual net operating income (NOI) by its purchase price or current value, then multiply by 100. For example, $12,000 of NOI on a $200,000 property is a 6% cap rate.
What is NOI and what goes into it?
Net operating income is the property's annual income after operating expenses, before mortgage payments, income taxes, and depreciation. Start with rent and other income, then subtract property taxes, insurance, maintenance, management, utilities, and vacancies.
Does a higher cap rate mean a better investment?
Not automatically. A higher cap rate means more income per dollar of price, but it usually signals more risk: a weaker location, an older building, or less reliable tenants. Judge the cap rate against similar properties in the same market, not in isolation.
How is cap rate different from cash-on-cash return?
Cap rate ignores how you pay for the property, so it measures the property itself. Cash-on-cash return divides your actual cash flow after mortgage payments by the cash you invested, so it measures your specific deal including financing.