Cap rate calculator
A property's cap rate is its yearly net operating income (rent minus running costs) divided by its price.
To see the cap rate, enter a price and monthly rent. Give us a ZIP code, and we'll fill in typical rent, tax and insurance for you.
We aren't a lender, broker, tax adviser or lawyer. These are estimates only.
How to calculate cap rate
- Full-year rent
- Multiply the monthly rent by 12
- $1,840 × 12 = $22,080
- Rent that you actually collect
- Take off what you lose in rent while the home stands empty (vacancy)
- $22,080 − 5% = $20,976
- Annual profit (NOI)
- What rent you collect, minus what it costs to run the home each year.
- $20,976 − $7,000 = $13,976
- The cap rate
- Work out yearly profit ÷ price
- $13,976 ÷ $205,000 = 6.82%
Total your rent for the year first, then take off rent lost to empty months plus the yearly running costs. Take what remains and divide it by the price. Because loan payments aren't included, you'll get the same result whether you borrow or pay cash.
Here the running costs are HOA dues (the homeowners association's monthly fees), money you set aside for big repairs, repairs, property tax and insurance. A property manager's fee is one of the running costs too. In ZIP 46219, a home priced at $205,000 and rented for $1,840 each month has running costs of $7,000 a year.
NOI needed at each cap rate level
Look for your price in the left column. The yearly profit (NOI) a home has to make for a given cap rate is listed in every column.
| Price | 5% | 6% | 7% | 8% | 9% |
|---|---|---|---|---|---|
| $150,000 | $7,500 | $9,000 | $10,500 | $12,000 | $13,500 |
| $200,000 | $10,000 | $12,000 | $14,000 | $16,000 | $18,000 |
| $250,000 | $12,500 | $15,000 | $17,500 | $20,000 | $22,500 |
| $300,000 | $15,000 | $18,000 | $21,000 | $24,000 | $27,000 |
| $400,000 | $20,000 | $24,000 | $28,000 | $32,000 | $36,000 |
| $500,000 | $25,000 | $30,000 | $35,000 | $40,000 | $45,000 |