Cap Rate Calculator
Enter the price and the real operating numbers — including vacancy and maintenance, which inflated listings leave out — and get net operating income and cap rate instantly. Free, no sign-up.
Income
Annual operating expenses
Cap rate
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Effective gross income
$0
Operating expenses
$0
Net operating income
$0
Cap rate excludes mortgage payments by design. For a return figure that includes your loan and down payment, use the cash-on-cash return calculator.
What Is Cap Rate?
Capitalization rate — cap rate — is the annual return a property produces on its own, before financing. It answers a single question: if you bought this building for cash, what percentage of the purchase price would it hand back each year?
Cap rate = NOI ÷ property value
where NOI = (gross rent + other income − vacancy loss) − operating expenses
Because it ignores the mortgage, cap rate is the one number that lets you line up a duplex you would buy with cash against a fourplex you would finance and compare them fairly. It describes the asset, not your deal.
A Worked Example
A $300,000 duplex renting for $2,400/month, with a 5% vacancy allowance and the expenses below:
| Gross annual rent ($2,400 × 12) | $28,800 |
| Less vacancy at 5% | −$1,440 |
| Effective gross income | $27,360 |
| Property taxes | −$3,600 |
| Insurance | −$1,500 |
| Repairs & maintenance | −$2,400 |
| Net operating income | $19,860 |
| Cap rate ($19,860 ÷ $300,000) | 6.62% |
What Counts as a Good Cap Rate?
Cap rate is only meaningful against comparable properties in the same market. Very roughly, across US residential rentals:
- 4–5% — expensive coastal metros. Low yield, but buyers are paying for appreciation and stability.
- 6–8% — typical of most mid-sized US markets. The range where cash flow and risk are usually balanced.
- 9%+ — cheaper markets, older buildings, or weaker neighborhoods. The extra yield is compensation for risk, turnover, and capital expense, not free money.
The most common way cap rate gets inflated is omitting vacancy and maintenance. A listing that quotes "8% cap" on gross rent with no vacancy allowance and no repair budget is describing a number that cannot survive a single turnover. Always rebuild it from the real operating expenses.
What Cap Rate Leaves Out
Cap rate is a snapshot of one year of operations at one price. It says nothing about:
- Financing. Two buyers with different loans get very different cash returns from the same cap rate.
- Capital expenditures. A roof, furnace, or full turnover is not an operating expense, but you will still pay for it.
- Appreciation and rent growth. A 4% cap rate in a market where rents climb steadily can beat an 8% cap rate in one where they do not.
- Taxes and depreciation. Cap rate is pre-tax. Run the depreciation calculator for that side.
Related Calculators
NOI calculator · cash-on-cash return calculator · rent increase calculator · rent vs. sell calculator · prorated rent calculator
Know Your Real Cap Rate, Not the Listing's
Kelpic tracks every expense, vacancy day, and rent payment across your properties — so the operating numbers this calculator asks for are the real ones, not estimates from memory.
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