Cap Rate Calculator
The cap rate is the property's yield before financing. Enter the price, rent and operating costs to see NOI and the cap rate, then set a target cap rate to see what the property would need to cost to reach it.
Cap rate
5.69%
$35,568 a year in net operating income on a $625,000 price.
- Net operating income62%
- Operating expenses33%
- Vacancy5%
- Gross annual rent
- $57,600
- Vacancy
- $2,880
- Effective gross income
- $54,720
- Operating expenses
- $19,152 (35.0%)
- Net operating income (NOI)
- $35,568
- Price for a 6.00% cap rate
- $592,800
- Difference from asking price
- -$32,200
To reach a 6.00% cap rate at this NOI, the price would need to come down by about $32,200, or NOI rise to $37,500.
| Cap rate | Value at this NOI | Versus price |
|---|---|---|
| 3.5% | $1,016,229 | $391,229 |
| 4.0% | $889,200 | $264,200 |
| 4.5% | $790,400 | $165,400 |
| 5.0% | $711,360 | $86,360 |
| 5.5% | $646,691 | $21,691 |
| 6.0% | $592,800 | -$32,200 |
| 6.5% | $547,200 | -$77,800 |
| 7.0% | $508,114 | -$116,886 |
| 7.5% | $474,240 | -$150,760 |
| 8.0% | $444,600 | -$180,400 |
Estimates for illustration only, not a loan offer or a commitment to lend. Rates, taxes, insurance and program rules vary; our team will confirm exact figures for your situation.
How this calculator works.
Annual gross rent is the monthly rent times twelve. Vacancy comes off first to give effective gross income, the rent you can expect to collect over a year.
Operating expenses can be entered as a dollar amount or as an expense ratio, a share of effective gross income. Many investors use 35% to 45% for small residential rentals when they do not yet have real numbers. The mortgage is never an operating expense.
NOI divided by the price is the cap rate. Turned around, NOI divided by a target cap rate gives the price at which the property would produce that yield, and the table shows the value across a range of cap rates.
Cap rate = NOI ÷ price. Price for a target cap rate = NOI ÷ target cap rate.
Common questions.
Turn the estimateinto real numbers.
Answer a few questions and our team will price your scenario with current rates and the right program.
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