{"id":67252,"date":"2026-10-20T13:05:59","date_gmt":"2026-10-20T10:05:59","guid":{"rendered":"https:\/\/wpcalc.com\/en\/?p=67252"},"modified":"2026-10-20T13:05:59","modified_gmt":"2026-10-20T10:05:59","slug":"cap-rate-calculator-capitalization-rate","status":"publish","type":"post","link":"https:\/\/wpcalc.com\/en\/finance\/cap-rate-calculator-capitalization-rate\/","title":{"rendered":"Cap Rate Calculator \u2013 Capitalization Rate"},"content":{"rendered":"<section class=\"not-prose calculator-box\" aria-labelledby=\"calculator-title\"><div class=\"flex items-baseline sm:items-center justify-between gap-2 sm:gap-3\"><div class=\"flex flex-col sm:flex-row sm:items-center gap-2\"><span class=\"icon icon-calculator text-primary-700! text-base! dark:text-primary-300!\" aria-hidden=\"true\"><\/span><h2 id=\"calculator-title\" class=\"text-lg font-display font-bold\">Calculate Cap Rate, NOI, or Property Value<\/h2><\/div><div class=\"calcdash-favorite group\">\n  <button type=\"button\" class=\"favorite\" id=\"favorite\" data-favorite-id=\"67252\" data-favorite-title=\"Cap Rate\" data-favorite-url=\"https:\/\/wpcalc.com\/en\/finance\/cap-rate-calculator-capitalization-rate\/\" data-favorite-excerpt=\"Calculate the capitalization rate of a rental property, or solve for NOI or property value. Enter rental income, vacancy, and operating expenses; fill any two of value, NOI, and cap rate to get the third.\" aria-label=\"Add to Favorites\" data-favorite-icon=\"icon icon-investment\">\n    <span class=\"icon icon-shape-star-empty\" aria-hidden=\"true\"><\/span>\n  <\/button>\n  <div class=\"calcdash-favorite__tip\" aria-hidden=\"true\">\n   <span class=\"favorite-tooltip\" id=\"favorite-tooltip\"><\/span>\n  <\/div>\n  <span class=\"sr-only\" role=\"status\" id=\"favorite-status\"><\/span>\n<\/div><\/div><form action=\"https:\/\/wpcalc.com\/en\/finance\/cap-rate-calculator-capitalization-rate\/\" method=\"POST\" class=\"calculator\" id=\"calculator-67252\" data-post=\"67252\"><fieldset class=\"fieldset-input is-2\"><legend class=\"sr-only\">Input Fields<\/legend><div class=\"is-single field\" id=\"input-1\"><span class=\"font-semibold\">Rental income<\/span><\/div><div class=\"field\" id=\"input-2\"><label for=\"field-2\">Gross rental income<\/label><div class=\"field-group\"><input type=\"text\" name=\"gross_rental_income\" id=\"field-2\" aria-describedby=\"calc-info-2\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"24000\"\/><div class=\"grid grid-cols-1\"><select id=\"field-3\" name=\"period\" aria-label=\"Period\"><option value=\"month\">per month<\/option><option value=\"year\" selected>per year<\/option><\/select><svg class=\"pointer-events-none col-start-1 row-start-1 mr-2 size-5 self-center justify-self-end text-gray-500 sm:size-4\" viewBox=\"0 0 16 16\" fill=\"currentColor\" aria-hidden=\"true\" data-slot=\"icon\">\n              <path fill-rule=\"evenodd\" d=\"M4.22 6.22a.75.75 0 0 1 1.06 0L8 8.94l2.72-2.72a.75.75 0 1 1 1.06 1.06l-3.25 3.25a.75.75 0 0 1-1.06 0L4.22 7.28a.75.75 0 0 1 0-1.06Z\" clip-rule=\"evenodd\" \/>\n            <\/svg><\/div><\/div><small id=\"calc-info-2\">Total rent if the property were fully occupied. Monthly rent is multiplied by 12.<\/small><\/div><div class=\"field\" id=\"input-3\"><label for=\"field-4\">Vacancy rate<\/label><input type=\"text\" name=\"vacancy_rate\" id=\"field-4\" aria-describedby=\"calc-unit-4 calc-info-4\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" max=\"100\" value=\"5\"\/><div class=\"unit\" id=\"calc-unit-4\">%<\/div><small id=\"calc-info-4\">Share of potential rent lost to vacancy and non-payment.<\/small><\/div><div class=\"is-single field\" id=\"input-4\"><span class=\"font-semibold\">Operating expenses (per year)<\/span><\/div><div class=\"field\" id=\"input-5\"><label for=\"field-6\">Expense entry<\/label><div class=\"grid grid-cols-1\"><select id=\"field-6\" name=\"expense_entry\"><option value=\"itemized\" selected>Itemized<\/option><option value=\"total\">Single total<\/option><\/select><svg class=\"pointer-events-none col-start-1 row-start-1 mr-2 size-5 self-center justify-self-end text-gray-500 sm:size-4\" viewBox=\"0 0 16 16\" fill=\"currentColor\" aria-hidden=\"true\" data-slot=\"icon\">\n              <path fill-rule=\"evenodd\" d=\"M4.22 6.22a.75.75 0 0 1 1.06 0L8 8.94l2.72-2.72a.75.75 0 1 1 1.06 1.06l-3.25 3.25a.75.75 0 0 1-1.06 0L4.22 7.28a.75.75 0 0 1 0-1.06Z\" clip-rule=\"evenodd\" \/>\n            <\/svg><\/div><\/div><div class=\"field\" id=\"input-6\"><label for=\"field-7\">Property taxes<\/label><input type=\"text\" name=\"property_taxes\" id=\"field-7\" aria-describedby=\"calc-unit-7\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"2400\"\/><div class=\"unit\" id=\"calc-unit-7\">$\/yr<\/div><\/div><div class=\"field\" id=\"input-7\"><label for=\"field-8\">Insurance<\/label><input type=\"text\" name=\"insurance\" id=\"field-8\" aria-describedby=\"calc-unit-8\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"900\"\/><div class=\"unit\" id=\"calc-unit-8\">$\/yr<\/div><\/div><div class=\"field\" id=\"input-8\"><label for=\"field-9\">Maintenance<\/label><div class=\"field-group\"><input type=\"text\" name=\"maintenance\" id=\"field-9\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"8\"\/><div class=\"grid grid-cols-1\"><select id=\"field-10\" name=\"basis\" aria-label=\"Basis\"><option value=\"pct\" selected>% of collected rent<\/option><option value=\"usd\">$ per year<\/option><\/select><svg class=\"pointer-events-none col-start-1 row-start-1 mr-2 size-5 self-center justify-self-end text-gray-500 sm:size-4\" viewBox=\"0 0 16 16\" fill=\"currentColor\" aria-hidden=\"true\" data-slot=\"icon\">\n              <path fill-rule=\"evenodd\" d=\"M4.22 6.22a.75.75 0 0 1 1.06 0L8 8.94l2.72-2.72a.75.75 0 1 1 1.06 1.06l-3.25 3.25a.75.75 0 0 1-1.06 0L4.22 7.28a.75.75 0 0 1 0-1.06Z\" clip-rule=\"evenodd\" \/>\n            <\/svg><\/div><\/div><\/div><div class=\"field\" id=\"input-9\"><label for=\"field-11\">Property management<\/label><div class=\"field-group\"><input type=\"text\" name=\"property_management\" id=\"field-11\" aria-describedby=\"calc-info-11\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"8\"\/><div class=\"grid grid-cols-1\"><select id=\"field-12\" name=\"basis\" aria-label=\"Basis\"><option value=\"pct\" selected>% of collected rent<\/option><option value=\"usd\">$ per year<\/option><\/select><svg class=\"pointer-events-none col-start-1 row-start-1 mr-2 size-5 self-center justify-self-end text-gray-500 sm:size-4\" viewBox=\"0 0 16 16\" fill=\"currentColor\" aria-hidden=\"true\" data-slot=\"icon\">\n              <path fill-rule=\"evenodd\" d=\"M4.22 6.22a.75.75 0 0 1 1.06 0L8 8.94l2.72-2.72a.75.75 0 1 1 1.06 1.06l-3.25 3.25a.75.75 0 0 1-1.06 0L4.22 7.28a.75.75 0 0 1 0-1.06Z\" clip-rule=\"evenodd\" \/>\n            <\/svg><\/div><\/div><small id=\"calc-info-11\">Collected rent = gross income minus vacancy.<\/small><\/div><div class=\"field\" id=\"input-10\"><label for=\"field-13\">Utilities<\/label><input type=\"text\" name=\"utilities\" id=\"field-13\" aria-describedby=\"calc-unit-13 calc-info-13\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"0\"\/><div class=\"unit\" id=\"calc-unit-13\">$\/yr<\/div><small id=\"calc-info-13\">Utility costs paid by the landlord.<\/small><\/div><div class=\"field\" id=\"input-11\"><label for=\"field-14\">HOA fees<\/label><input type=\"text\" name=\"hoa_fees\" id=\"field-14\" aria-describedby=\"calc-unit-14\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"0\"\/><div class=\"unit\" id=\"calc-unit-14\">$\/yr<\/div><\/div><div class=\"field\" id=\"input-12\"><label for=\"field-15\">Other expenses<\/label><input type=\"text\" name=\"other_expenses\" id=\"field-15\" aria-describedby=\"calc-unit-15\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"600\"\/><div class=\"unit\" id=\"calc-unit-15\">$\/yr<\/div><\/div><div class=\"field\" id=\"input-13\" hidden><label for=\"field-16\">Total operating expenses<\/label><input type=\"text\" name=\"total_operating_expenses\" id=\"field-16\" aria-describedby=\"calc-unit-16 calc-info-16\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"4000\"\/><div class=\"unit\" id=\"calc-unit-16\">$\/yr<\/div><small id=\"calc-info-16\">Tax, insurance, maintenance, management, utilities, HOA \u2014 everything except the mortgage.<\/small><\/div><div class=\"is-single field\" id=\"input-14\"><span class=\"font-semibold\">Value, NOI, or cap rate \u2014 fill any two<\/span><\/div><div class=\"field\" id=\"input-15\"><label for=\"field-18\">Property value or purchase price<\/label><input type=\"text\" name=\"property_value_or_purchase_price\" id=\"field-18\" aria-describedby=\"calc-unit-18\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0.01\" value=\"300000\"\/><div class=\"unit\" id=\"calc-unit-18\">$<\/div><\/div><div class=\"field\" id=\"input-16\"><label for=\"field-19\">Net operating income (NOI)<\/label><input type=\"number\" name=\"net_operating_income_noi\" id=\"field-19\" aria-describedby=\"calc-info-19\" placeholder=\"e.g. 15,000\" step=\"any\"\/><small id=\"calc-info-19\">Leave blank to compute NOI from the income and expenses above. A number typed here overrides the worksheet.<\/small><\/div><div class=\"field\" id=\"input-17\"><label for=\"field-20\">Cap rate<\/label><input type=\"number\" name=\"cap_rate\" id=\"field-20\" aria-describedby=\"calc-unit-20 calc-info-20\" placeholder=\"Auto\" step=\"any\"\/><div class=\"unit\" id=\"calc-unit-20\">%<\/div><small id=\"calc-info-20\">Leave blank to solve. To solve for NOI instead, clear Gross rental income and enter value and cap rate. Typical range: 4\u201310%.<\/small><\/div><div class=\"is-single field\" id=\"input-18\"><span class=\"font-semibold\">Cash-on-cash return (optional)<\/span><\/div><div class=\"field\" id=\"input-19\"><label for=\"field-22\">Cash invested (down payment)<\/label><input type=\"text\" name=\"cash_invested_down_payment\" id=\"field-22\" aria-describedby=\"calc-unit-22 calc-info-22\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" placeholder=\"e.g. 75,000\" min=\"0\"\/><div class=\"unit\" id=\"calc-unit-22\">$<\/div><small id=\"calc-info-22\">Down payment plus closing and upfront renovation costs. Leave blank to skip this section.<\/small><\/div><div class=\"field\" id=\"input-20\"><label for=\"field-23\">Annual mortgage payment (debt service)<\/label><input type=\"text\" name=\"annual_mortgage_payment_debt_service\" id=\"field-23\" aria-describedby=\"calc-unit-23 calc-info-23\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" placeholder=\"e.g. 14,000\" min=\"0\"\/><div class=\"unit\" id=\"calc-unit-23\">$\/yr<\/div><small id=\"calc-info-23\">Principal and interest paid per year. Left blank, it is treated as zero.<\/small><\/div><\/fieldset><div class=\"buttons\"><button type=\"submit\" data-text=\"Re-Calculate\" id=\"calculate-button\" data-post=\"67252\">Calculate<\/button><button type=\"reset\">Reset<\/button><\/div><div class=\"field is-checkbox hidden!\" id=\"field-auto-calc\"><input type=\"checkbox\" id=\"auto-calc\"><label for=\"auto-calc\">Calculate automatically<\/label><small>If enabled, the result will update automatically when you change any value.<\/small><\/div><div class=\"fieldset-result is-hidden\" aria-labelledby=\"result-title\" aria-live=\"polite\" role=\"region\"> <h3 class=\"result-title bg-gradient-to-r from-primary-50 to-gray-50 dark:from-primary-900 dark:to-gray-800\" id=\"result-title\"><span class=\"icon icon-s-pulse\" aria-hidden=\"true\"><\/span> Your Cap Rate Results<\/h3><div class=\"result-box\"><div class=\"field-result\" id=\"output-1\"><span class=\"field-title\"><span>Effective gross income<\/span><\/span><span class=\"field-value\" id=\"result-1\" data-unit=\"$\/yr\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-2\"><span class=\"field-title\"><span>Total operating expenses<\/span><\/span><span class=\"field-value\" id=\"result-2\" data-unit=\"$\/yr\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-3\"><span class=\"field-title\"><span>Net operating income (NOI)<\/span><\/span><span class=\"field-value\" id=\"result-3\" data-unit=\"$\/yr\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-4\"><span class=\"field-title\"><span>Cap rate<\/span><\/span><span class=\"field-value\" id=\"result-4\" data-unit=\"%\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-5\"><span class=\"field-title\"><span>Property value<\/span><\/span><span class=\"field-value\" id=\"result-5\" data-unit=\"$\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result is-column\" id=\"output-6\"><span class=\"field-title\"><span>What this cap rate means<\/span><\/span><span class=\"field-value\" id=\"result-6\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-7\"><span class=\"field-title\"><span>Annual cash flow after debt service<\/span><\/span><span class=\"field-value\" id=\"result-7\" data-unit=\"$\/yr\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result\" id=\"output-8\"><span class=\"field-title\"><span>Cash-on-cash return<\/span><\/span><span class=\"field-value\" id=\"result-8\" data-unit=\"%\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result is-column\" id=\"output-9\"><span class=\"field-title\"><span>Income and expense breakdown<\/span><\/span><span class=\"field-value\" id=\"result-9\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><\/div><div class=\"result-actions\"><button type=\"button\" class=\"copy-link\"><svg viewBox=\"0 0 20 20\" fill=\"currentColor\" aria-hidden=\"true\"><path d=\"M12.232 4.232a2.5 2.5 0 0 1 3.536 3.536l-1.225 1.224a.75.75 0 0 0 1.061 1.06l1.224-1.224a4 4 0 0 0-5.656-5.656l-3 3a4 4 0 0 0 .225 5.865.75.75 0 0 0 .977-1.138 2.5 2.5 0 0 1-.142-3.667l3-3Z\"\/><path d=\"M11.603 7.963a.75.75 0 0 0-.977 1.138 2.5 2.5 0 0 1 .142 3.667l-3 3a2.5 2.5 0 0 1-3.536-3.536l1.225-1.224a.75.75 0 0 0-1.061-1.06l-1.224 1.224a4 4 0 1 0 5.656 5.656l3-3a4 4 0 0 0-.225-5.865Z\"\/><\/svg><span class=\"copy-link__text\">Copy link to this calculation<\/span><\/button><span class=\"sr-only\" role=\"status\" id=\"copy-link-status\"><\/span><\/div><\/div><a href=\"#respond\" class=\"hidden transition-opacity duration-300 opacity-0 w-50 text-sm justify-center items-center gap-2 px-4 py-2 rounded bg-gray-200 text-gray-700 hover:bg-gray-300\" id=\"leave-comment\"><span class=\"icon icon-comments\" aria-hidden=\"true\"><\/span>Leave a Comment<\/a><\/form><\/section><section id=\"calc-reactions\" class=\"not-prose hidden my-12 bg-gradient-to-r from-primary-50 to-gray-50 border border-indigo-100 rounded-xl px-6 py-4 shadow-sm\" data-post=\"67252\" aria-live=\"polite\" aria-labelledby=\"calc-reactions-title\"><p id=\"calc-reactions-title\" class=\"text-sm text-gray-500 text-center mb-2\">How did this result make you feel?<\/p><div role=\"group\" aria-labelledby=\"calc-reactions-title\" class=\"grid grid-cols-3 sm:flex sm:flex-row sm:justify-around gap-4 sm:items-center sm:flex-wrap\"><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"like\"><span class=\"reaction-count\" data-reaction-count=\"like\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude00 <\/span><span class=\"reaction-description font-medium\">Like <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"helpful\"><span class=\"reaction-count\" data-reaction-count=\"helpful\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\udca1 <\/span><span class=\"reaction-description font-medium\">Helpful <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"confused\"><span class=\"reaction-count\" data-reaction-count=\"confused\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude15 <\/span><span class=\"reaction-description font-medium\">Confused <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"disappointed\"><span class=\"reaction-count\" data-reaction-count=\"disappointed\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude1e <\/span><span class=\"reaction-description font-medium\">Disappointed <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"inaccurate\"><span class=\"reaction-count\" data-reaction-count=\"inaccurate\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\u274c <\/span><span class=\"reaction-description font-medium\">Inaccurate <\/span><\/button><\/div><div id=\"reaction-message\" class=\"hidden mt-8 rounded-md border border-primary-100 bg-white\/50 backdrop-blur-sm px-4 py-2 text-sm text-center shadow-sm\"><\/div><\/section><div class=\"calcdash-ad not-prose calcdash-ad--calc_result calcdash-ad--in-article\"><ins class=\"adsbygoogle\" style=\"display:block\" data-ad-client=\"ca-pub-1721569815777345\" data-ad-slot=\"6317458308\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\"><\/ins><script>(adsbygoogle = window.adsbygoogle || []).push({});<\/script><\/div>\n<style id=\"wpcoderpro-inline-1\">.formula-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section class=\"formula-box\" aria-labelledby=\"formula-title\">\r\n\t<div id=\"formula-title\" class=\"not-prose font-display mb-4\"><span class=\"icon icon-formula\" aria-hidden=\"true\"><\/span><h2>Cap Rate Formula<\/h2><\/div>\r\n\t<figure class=\"not-prose formula\">\r\n\t\t<figcaption class=\"formula-title\">Formula<\/figcaption>\r\n\t\t<div class=\"text-base text-gray-800\" id=\"formula\">\\[ \\text{Cap Rate} = \\frac{\\text{Net Operating Income (NOI)}}{\\text{Property Value}} \\times 100\\% \\]<\/div>\r\n\t<\/figure>\r\n\t<\/p>\n<p><strong>Where:<\/strong><\/p>\n<ul>\n<li>\\(\\text{NOI}\\) \u2014 net operating income: annual rental income after vacancy, minus all operating expenses (property taxes, insurance, maintenance, management, utilities, HOA, and other costs), but <em>before<\/em> any mortgage payments<\/li>\n<li>\\(\\text{Property Value}\\) \u2014 the purchase price or current market value of the property<\/li>\n<\/ul>\n<p>The formula expresses the property's unleveraged annual income yield: what percentage of its value the property earns in net operating income each year, ignoring financing, appreciation, and taxes.<\/p>\n<p>NOI itself is built up in two steps:<\/p>\n<p>\\[ \\text{EGI} = \\text{Gross Income} \\times (1 - \\text{Vacancy Rate}), \\qquad \\text{NOI} = \\text{EGI} - \\text{Operating Expenses} \\]<\/p>\n<p>The capitalization rate also implies the other two quantities when rearranged: \\( \\text{Value} = \\text{NOI} \/ \\text{Cap Rate} \\) and \\( \\text{NOI} = \\text{Value} \\times \\text{Cap Rate} \\) \u2014 which is exactly what this calculator does when you leave one field blank.<\/p>\n<p>\r\n<\/section>\n<style id=\"wpcoderpro-inline-459\">.calculation-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section id=\"calculation\" class=\"calculation-box\" aria-labelledby=\"calculation-title\">\r\n\t<div id=\"calculation-title\" class=\"not-prose font-display\"><span class=\"icon icon-unordered-list\" aria-hidden=\"true\"><\/span><h2>Cap Rate \u2013 Calculation Example<\/h2><\/div>\r\n\r\n<\/p>\n<p><strong>Example:<\/strong> a single-family rental is purchased for $300,000. The owner collects $24,000 a year in gross rent, expects a 5% vacancy rate, and pays $2,400 in property taxes, $900 in insurance, $600 in other expenses, plus 8% of collected rent each for maintenance and property management.<\/p>\n<p><strong>Step 1 \u2014 effective gross income (EGI):<\/strong><\/p>\n<p>\\[ 24{,}000 \\times (1 - 0.05) = 22{,}800 \\ \\$\/\\text{yr} \\]<\/p>\n<p><strong>Step 2 \u2014 operating expenses:<\/strong><\/p>\n<p>\\[ 2{,}400 + 900 + 600 + 2 \\times (0.08 \\times 22{,}800) = 2{,}400 + 900 + 600 + 3{,}648 = 7{,}548 \\ \\$\/\\text{yr} \\]<\/p>\n<p><strong>Step 3 \u2014 net operating income (NOI):<\/strong><\/p>\n<p>\\[ 22{,}800 - 7{,}548 = 15{,}252 \\ \\$\/\\text{yr} \\]<\/p>\n<p><strong>Step 4 \u2014 cap rate:<\/strong><\/p>\n<p>\\[ \\text{Cap Rate} = \\frac{15{,}252}{300{,}000} \\times 100\\% \\approx 5.084\\% \\]<\/p>\n<p><strong>Result:<\/strong> the property has a cap rate of about <strong>5.08%<\/strong> \u2014 a low-to-moderate yield typical of larger, high-demand markets.<\/p>\n<p>\n\r\n<\/section>\n<h2>How to use the calculator<\/h2>\n<ol>\n<li>Enter your <strong>Gross rental income<\/strong> in the <em>Rental income<\/em> section and choose <em>per month<\/em> or <em>per year<\/em> from the Period dropdown. Monthly rent is automatically multiplied by 12.<\/li>\n<li>Set the <strong>Vacancy rate<\/strong> \u2014 the share of potential rent lost to empty units or tenants not paying. If you are unsure, 5% is a common planning assumption.<\/li>\n<li>In the <em>Operating expenses<\/em> section, pick <strong>Itemized<\/strong> or <strong>Single total<\/strong> for the Expense entry. Itemized lets you fill in <strong>Property taxes<\/strong>, <strong>Insurance<\/strong>, <strong>Utilities<\/strong>, <strong>HOA fees<\/strong>, <strong>Other expenses<\/strong>, and <strong>Maintenance<\/strong> and <strong>Property management<\/strong> (each either as a dollar amount per year or as a percentage of collected rent).<\/li>\n<li>Under <em>Value, NOI, or cap rate \u2014 fill any two<\/em>: enter the <strong>Property value or purchase price<\/strong>, the <strong>Net operating income (NOI)<\/strong>, and\/or the <strong>Cap rate<\/strong>. Leave exactly one of the three blank \u2014 the calculator solves for it. NOI is usually computed automatically from your income and expenses; only type a number there if you want to override that figure.<\/li>\n<li>Optionally, complete the cash-on-cash section: enter your <strong>Cash invested (down payment)<\/strong> and <strong>Annual mortgage payment (debt service)<\/strong> to see your annual cash flow after debt service and the <strong>Cash-on-cash return<\/strong> on your invested cash.<\/li>\n<li>Press <strong>Calculate<\/strong>. The results show your effective gross income, total operating expenses, NOI, cap rate, property value, an interpretation of the cap rate, and a full income and expense breakdown table.<\/li>\n<\/ol>\n<h2>What is a capitalization rate?<\/h2>\n<p>The capitalization rate \u2014 cap rate for short \u2014 is the standard yardstick for valuing income-producing real estate. It is the ratio of a property's net operating income to its value, expressed as a percentage. A 6% cap rate means the property generates net operating income equal to 6% of its price each year, before financing and taxes. In effect, it answers the question: <em>if I paid cash for this building, what annual income yield would I get?<\/em><\/p>\n<p>Because it excludes the mortgage, the cap rate measures the <em>property's<\/em> performance, not the investor's financing choices. That makes it ideal for comparing buildings against each other, tracking a market over time, or sanity-checking an asking price. A property listing at a cap rate far above comparable sales is either a bargain or \u2014 more often \u2014 a property with problems the numbers aren't showing.<\/p>\n<p>Interpreting the number matters as much as computing it. Typical US residential cap rates fall roughly between 4% and 10%. Low cap rates (4\u20136%) are usual in prime big-city markets where investors accept thin cash yields in exchange for appreciation and stability. Higher cap rates (8\u201310%) are common in smaller cities and lower-appreciation areas, but they can also signal risk: distressed properties, weak tenant demand, or optimistic rent assumptions. Never compare cap rates across different markets or asset classes without context \u2014 a \"better\" number often just means a riskier address.<\/p>\n<p>Investors also use the cap rate in reverse. If the market for similar buildings trades at a 6.5% cap rate and a property produces $19,000 in NOI, its implied value is \\( 19{,}000 \/ 0.065 \\approx \\$292{,}000 \\). This is how appraisers and commercial buyers price income property, and it is the calculation this calculator performs when you leave the value field blank.<\/p>\n<h2>Limitations and practical tips<\/h2>\n<ul>\n<li><strong>Never include the mortgage.<\/strong> Principal and interest payments are financing costs, not operating costs. Cap rate deliberately ignores debt; use the cash-on-cash section of the calculator to measure your leveraged return instead.<\/li>\n<li><strong>Garbage in, garbage out.<\/strong> The result is only as good as your vacancy and expense assumptions. Understated maintenance, skipped reserves for the roof and appliances, or a rosy vacancy rate will inflate the cap rate. Compare the computed NOI against the seller's actual financials (rent rolls, tax bills, and repair history) before trusting it.<\/li>\n<li>A high cap rate is not automatically a good deal. Weigh the income yield against appreciation expectations, location quality, and property condition, and remember that the number can be manipulated by using projected (rather than actual) income.<\/li>\n<li><strong>Cap rate vs. other metrics.<\/strong> The cap rate ignores financing, income taxes, depreciation benefits, and future appreciation. Pair it with <a href=\"https:\/\/wpcalc.com\/en\/finance\/mortgage-payoff-calculator-with-extra-payments\/\">mortgage payoff planning<\/a> and your <a href=\"https:\/\/wpcalc.com\/en\/finance\/debt-to-income-ratio-calculator\/\">debt-to-income ratio<\/a> to see the full picture of an investment, since most buyers combine a cap rate with a loan.<\/li>\n<li>Check whether annual figures include capital expenditures (a new roof is not a routine operating expense but it is a very real cost), and keep percentage-based expenses consistent \u2014 maintenance and management fees in this calculator are percentages of <em>collected<\/em> rent (after vacancy), which matches industry practice.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Calculate the capitalization rate of a rental property, or solve for NOI or property value. Enter rental income, vacancy, and operating expenses; fill any two of value, NOI, and cap rate to get the third.<\/p>\n","protected":false},"author":3168,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[27],"class_list":["post-67252","post","type-post","status-publish","format-standard","hentry","category-finance","tag-investment"],"acf":[],"_links":{"self":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/67252","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/users\/3168"}],"replies":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/comments?post=67252"}],"version-history":[{"count":1,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/67252\/revisions"}],"predecessor-version":[{"id":67255,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/67252\/revisions\/67255"}],"wp:attachment":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/media?parent=67252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/categories?post=67252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/tags?post=67252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}