About the Cap Rate Calculator
The cap rate, or capitalization rate, compares the income a property earns with its price. It is the net operating income divided by the purchase price, as a percentage, and it lets you compare properties without regard to how they are financed. This calculator takes the yearly rent, a vacancy allowance, the operating costs and the price, and gives the net operating income, the cap rate and the gross rent multiplier. Type the yearly rent, the vacancy allowance, the operating costs and the price and the capitalization rate appears at once, with a few related figures underneath, and you can copy the result with one tap. The sums run in your browser, so nothing you enter is uploaded.
Updated October 2026
How to use the Cap Rate Calculator
- 1Enter the yearly rent, the vacancy allowance, the operating costs and the price.
- 2Pick the units or options from the menus if the capitalization rate tool offers them.
- 3Read the capitalization rate in the large result box.
- 4Look at the extra rows for related figures.
- 5Press Copy result to keep the answer.
When you need the capitalization rate
Investors use the cap rate to compare properties, to judge whether a price is fair and to estimate a value from the income. A higher cap rate suggests a higher return and often higher risk; lower rates are found in safer, more expensive areas.
Operating costs include taxes, insurance, repairs, management and utilities paid by the owner, but not the mortgage or income tax. Leaving them out makes a property look better than it is.
How the capitalization rate is worked out
Net operating income (NOI) = rent × (1 − vacancy) − operating costs. Cap rate = NOI ÷ price. Gross rent multiplier = price ÷ gross yearly rent. A property that can rent for 24,000 a year, with 5 percent vacancy and 6,000 of operating costs, has rent after vacancy of 22,800 and an NOI of 16,800. At a price of 200,000 the cap rate is 8.4 percent, and the gross rent multiplier is 8.33.
Every answer on this page comes from that one rule, so you can check any result by hand with a calculator. The figures shown underneath, such as other units, are conversions of the same answer.
- NOI and cap rate
- Gross rent multiplier
- Vacancy allowance
Mistakes to avoid with capitalization rate
The cap rate ignores financing, growth in rent and in the property value, so it is only one piece of the picture. It also assumes the income figures are realistic. Check the numbers with the seller's records and with local market data.
On phone and computer
On a phone, type into the boxes one after another and read the capitalization rate underneath; Copy result puts it on the clipboard for a message or a note. On a computer the inputs sit on the left and the answer on the right, so you can change one figure and watch the capitalization rate move. The cap rate calculator works the same on both. Property decisions involve more figures. Use Rental Property Calculator for cash flow, ROI Calculator for return, Mortgage Calculator for monthly costs, and Down Payment Calculator for the money you need up front.
Features
- Include all running costs
- Not the mortgage
- One measure among several
- Clear messages when the capitalization rate inputs make no sense
- Copy the result with one tap
- Private: nothing is uploaded
Frequently asked questions
How do I calculate capitalization rate?
Net operating income (NOI) = rent × (1 − vacancy) − operating costs. Cap rate = NOI ÷ price. Gross rent multiplier = price ÷ gross yearly rent. A property that can rent for 24,000 a year, with 5 percent vacancy and 6,000 of operating costs, has rent after vacancy of 22,800 and an NOI of 16,800. At a price of 200,000 the cap rate is 8.4 percent, and the gross rent multiplier is 8.33.
What is the formula for capitalization rate?
Net operating income (NOI) = rent × (1 − vacancy) − operating costs. Cap rate = NOI ÷ price. Gross rent multiplier = price ÷ gross yearly rent. The cap rate calculator applies it exactly and rounds only the displayed answer to six significant figures.
What is a good cap rate?
It depends on the market. 4 to 5 percent is common in prime areas, 8 to 10 percent in riskier ones.
Does the mortgage count?
No. The cap rate is before financing, so the loan is left out.
What is the gross rent multiplier?
The price divided by the gross yearly rent. A lower number suggests better value, other things being equal.
Is this cap rate calculator free and private?
Yes. It is free, needs no account and runs in your browser, so the numbers you type are not uploaded or stored.