Cap rate calculator
What the property earns relative to its price, before financing.
Cap rate
6.50%
Net operating income
$19,500
Cap rate = Net operating income ÷ Purchase price
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Is this a good investment? →How it works
Cap rate tells you how much a property earns each year as a percentage of its price, as if you paid all cash. It strips out financing so you can compare properties fairly.
Net operating income (NOI) is rent after vacancy minus operating expenses — taxes, insurance, maintenance, management. It never includes the mortgage.
Frequently asked questions
What is a good cap rate?
For residential rentals, 5–8% is typical. Higher cap rates usually mean higher risk or less desirable areas; lower cap rates are common in expensive, stable markets.
Does cap rate include the mortgage?
No. Cap rate ignores financing. Use cash-on-cash return to see what you earn on the cash you actually put in.
Is a higher cap rate always better?
Not always. A high cap rate can signal a property that needs work, a weak rental market, or unreliable tenants.