Rental Math
Know what a property really earns.

Cap Rate Calculator

Calculate a rental property's capitalization rate from rent, vacancy, and operating expenses, and see the value its income supports.

Published:

Updated:

Quick Answer

Cap Rate Calculator estimates cap rate of 3.65% and net operating income (annual) of $12,770 for this scenario.

Key Takeaways

  • Cap Rate Calculator estimates cap rate of 3.65% and net operating income (annual) of $12,770 for this scenario.
  • Cap rate divides a property's net operating income by its price, so it measures income return before any mortgage. This scenario produces $12,770 of NOI ($1,064 per month) from $20,520 of effective rental income after vacancy.
  • It depends on the market and the risk, but many investors look for roughly 5–8% in stable areas and higher where rents are strong relative to prices. This scenario comes out at 3.65%. Very high cap rates usually signal higher risk or understated expenses rather than a free lunch.

Calculation Output

Cap Rate

3.65%

Net Operating Income (Annual)

$12,770

Net Operating Income (Monthly)

$1,064

Effective Gross Income (after vacancy)

$20,520

Total Operating Expenses

$7,750

Value Supported at Market Cap Rate

$212,833

Result Chart

Cap Rate

3.65%

Net Operating Income (Annual)

$12,770

Net Operating Income (Monthly)

$1,064

Effective Gross Income (after vacancy)

$20,520

Total Operating Expenses

$7,750

Key Facts

Cap Rate3.65%
Net Operating Income (Annual)$12,770
Net Operating Income (Monthly)$1,064
Effective Gross Income (after vacancy)$20,520
Total Operating Expenses$7,750
Value Supported at Market Cap Rate$212,833

How This Estimate Works

  • Cap rate divides a property's net operating income by its price, so it measures income return before any mortgage. This scenario produces $12,770 of NOI ($1,064 per month) from $20,520 of effective rental income after vacancy.
  • That makes the cap rate 3.65% — below 4% — the price leans on appreciation or rent growth rather than current income, so small expense surprises eat a large share of the return.
  • Operating expenses total $7,750 per year, or about 37.8% of effective income. Cap-rate comparisons only work when every property counts expenses the same way, so check that taxes, insurance, maintenance, HOA, and management are all included.
  • At a 6% market cap rate, this income supports a value of about $212,833 — roughly $137,167 below the $350,000 price, which means you would be paying for appreciation or rent growth rather than today's income.
  • Cap rate deliberately ignores financing: the same property shows the same cap rate whether you pay cash or borrow. Pair it with a debt-service check so a good cap rate does not hide a payment the rent cannot carry.

FAQ

What is a good cap rate for a rental property?

It depends on the market and the risk, but many investors look for roughly 5–8% in stable areas and higher where rents are strong relative to prices. This scenario comes out at 3.65%. Very high cap rates usually signal higher risk or understated expenses rather than a free lunch.

How is cap rate calculated?

Cap rate = net operating income ÷ property value. NOI is the rent after vacancy minus operating expenses (taxes, insurance, maintenance, HOA, management) — but before any mortgage payment. Here, $12,770 of NOI on the entered price gives 3.65%.

Does cap rate include the mortgage payment?

No. Cap rate is an unleveraged measure — it treats the property as if bought with cash. Your actual cash-on-cash return will differ once a loan is involved, which is why investors check cap rate alongside the debt service coverage ratio (DSCR).

What value does this income support at a 6% cap rate?

Divide NOI by the market cap rate: $12,770 ÷ 6% ≈ $212,833. If similar properties trade around a 6% cap, that is roughly the price this income justifies — pay more and you are betting on rent growth or appreciation.

Why did my cap rate come out negative or near zero?

That happens when operating expenses meet or exceed the rent after vacancy. Recheck that every expense is entered once and the rent is realistic — a near-zero cap rate means the property produces almost no income at its current price.

Decision Guides

More Scenarios

Related Tools