How to use the cap rate calculator
- Enter the price (or current value) and the number of units.
- Enter the rent per unit and any other income, then the expected vacancy and management fee.
- Enter the yearly operating expenses: property tax, insurance, maintenance, HOA and any utilities you pay. Don't include the mortgage.
- Enter the market cap rate for similar properties to estimate value.
From rent to NOI
| Line | Per year |
|---|---|
| Gross rent ($2,200 × 12) | $26,400 |
| Vacancy (5%) | − $1,320 |
| Effective gross income | $25,080 |
| Property tax | − $3,600 |
| Insurance | − $1,500 |
| Maintenance & repairs | − $2,400 |
| Management (8%) | − $2,006 |
| Net operating income | $15,574 |
The expense ratio is about 38% of collected rent, in the typical range for a single-family rental.
What NOI is worth at different cap rates
| Cap rate | Value of $15,574 NOI |
|---|---|
| 4% | about $389,000 |
| 5% | about $311,000 |
| 6% | about $260,000 |
| 7% | about $222,000 |
| 8% | about $195,000 |
This is why cap rate matters to buyers and sellers: in a 5% market, raising NOI by $1,200 a year adds about $24,000 of value.
Using cap rate well
- Compare like with like: similar property types, locations and condition.
- Use real expenses, not the seller's best case. Property tax often rises after a sale because of reassessment; see the property tax calculator.
- Include vacancy and management even if you plan to self-manage; your time has a cost.
- Remember cap rate ignores leverage. Your own return depends on your loan, down payment and closing costs. The rental property calculator shows monthly cash flow and cash-on-cash return with a mortgage.
Cap rate and interest rates
Cap rates tend to move with interest rates. When mortgage rates rise, buyers need a higher yield to make a deal work, so cap rates drift up and prices for the same NOI fall. When rates fall, the opposite happens. That's why a property bought at a 4% cap rate when money was cheap can be worth less a few years later even if the rent hasn't changed. When you buy, ask whether the deal still works if cap rates rise by one point.
Raising your cap rate (and value)
- Raise rent to market at renewal.
- Cut vacancy with good tenant screening and fast turnovers.
- Add income: parking, storage, laundry, pet fees.
- Lower expenses: shop insurance, appeal the tax assessment, do preventive maintenance.
Run the property like a business
RentRoll is a landlord dashboard that tracks rent, expenses, repairs and tenants for each building, with a Schedule E-style summary at tax time, so your real NOI is always one tap away. Try the free demo with sample buildings.
Estimates only. Market cap rates vary; this isn't investment advice.
Frequently asked questions
How do you calculate cap rate?
What is net operating income (NOI)?
What is a good cap rate?
How do I estimate a property's value from cap rate?
What's the difference between cap rate and cash-on-cash return?
Should I include the mortgage in cap rate?
Written by
Finance Specialist & Editor, VaultlyApps
Emma Whitfield writes and edits the VaultlyApps money guides and free calculators. Her focus is US household finance — budgeting on a real paycheck, paying down credit card and student debt, emergency funds and savings goals, renting — and the money side of freelancing and small-business income, from pricing and profit margins to self-employment tax. Every guide is researched against primary sources such as IRS publications and the CFPB, every number is checked in our tested calculators, and tax content is reviewed each year when new IRS figures come out. Emma is not a licensed financial adviser or tax preparer; her work is general education, not personal advice.
Researched against primary US sources, checked against independent calculators and reviewed by a finance expert on our team. Written for US readers — general education, not financial, tax or legal advice. Editorial policy · Disclaimer
