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Cap Rate Calculator
Cap rate is the fastest way to compare rental deals on their own merits — before financing. Enter a price and rent to get the capitalization rate, net operating income, and how the number stacks up against a healthy band.
Educational calculators — always consult a licensed professional before making financial decisions.
The all-in acquisition price of the property.
Gross rent before any expenses — check local comps.
Know your costs? Enter them. If not, the 50% rule estimates them.
Share of the year the unit sits empty. ~5% is a common baseline. (Ignored under the 50% rule.)
Property tax + insurance + maintenance + management + repairs. Exclude mortgage. (Used only in 'Enter my expenses' mode.)
Cap Rate
4.3%
NOI $15,000 ÷ price $350,000
Marker shows this property's cap rate against the US healthy band.
Cap rate excludes mortgage payments and income tax by design. Compare it against similar properties in the same market — not a universal benchmark. Estimate only; consult a licensed professional.
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What you'll need
- ·Purchase or listing price
- ·Expected gross monthly rent
- ·Operating expenses (or use the 50% rule)
- ·A vacancy allowance (optional)
What you'll get
- ✓Cap rate — NOI ÷ purchase price
- ✓Net operating income — Rent after vacancy and expenses
- ✓Healthy-band benchmark — How your number compares
What cap rate actually tells you
The capitalization rate is the annual return a property produces relative to its price, assuming you paid all cash. Formally, cap rate = net operating income (NOI) ÷ purchase price. NOI is the rent you actually collect after vacancy, minus every operating cost — property tax, insurance, maintenance, management, and repairs — but not your mortgage payment or income tax. That deliberate exclusion of financing is what makes cap rate so useful: it describes the building itself, so you can line up two deals side by side regardless of how each is financed.
What counts as a good cap rate? For US residential rentals, roughly 5–10% is the range most investors treat as healthy. National multifamily transactions averaged about 5.6–5.7% across 2025 and into 2026. But the average hides a wide spread. Gateway and coastal metros — New York, Los Angeles, San Francisco, Boston — commonly trade at 4–5% because buyers accept a thin current yield in exchange for long-run appreciation. Cash-flow markets in the Midwest and Southeast tell the opposite story: Cleveland, Memphis, Birmingham, and Indianapolis routinely produce cap rates of 6–8%. The right number is always relative to comparable properties in the same market, not a single nationwide target.
A worked example. Say a duplex lists for $350,000 and rents for $2,500 a month, or $30,000 a year. Apply the 50% rule — a screening shortcut that assumes operating expenses run about half of gross rent — and NOI is roughly $15,000. Divide by the $350,000 price and the cap rate is about 4.3%. If you later confirm real expenses are closer to 38% of rent, NOI rises to about $18,600 and the cap rate improves to around 5.3%. Small changes in the expense assumption move the answer meaningfully, which is why entering your own numbers matters once you have them.
What cap rate leaves out. Because it ignores financing, cap rate says nothing about your actual cash return after a mortgage — that's cash-on-cash return. It also ignores appreciation, principal paydown, and taxes, so a low-cap-rate property in a fast appreciating market can still be the better total-return investment. Use cap rate as a first screen, then run a full cash-flow analysis on the deals that pass.
How it works
Enter price and rent
Input the purchase price and expected gross monthly rent for the property.
Set operating expenses
Enter your annual operating costs, or use the 50% rule to estimate them instantly.
Read the cap rate
Get NOI and cap rate, and see how the number compares to a healthy band.
Typical cap rate by US market type (2025–2026)
| Market type | Example cities | Cap rate range |
|---|---|---|
| Gateway / coastal | New York, Los Angeles, San Francisco, Boston | 4.0–5.0% |
| National multifamily avg | Across all US markets | ~5.6% |
| Balanced metros | Dallas, Atlanta, Phoenix, Charlotte | 5.0–6.5% |
| Cash-flow markets | Cleveland, Memphis, Birmingham, Indianapolis | 6.5–8.0% |
Directional ranges from CBRE US Cap Rate Survey (H2 2025) and market aggregators; cap rates move quarterly. Higher cap rate can mean stronger cash flow or higher risk.
Frequently asked questions
What is a good cap rate for a rental property?+
For US residential rentals, a cap rate of roughly 5–10% is generally considered healthy. National multifamily transactions averaged about 5.6–5.7% in 2025–2026. Gateway/coastal markets (New York, Los Angeles, San Francisco) often trade at 4–5% because buyers accept lower current yield in exchange for appreciation, while Midwest and Southeast cash-flow markets (Cleveland, Memphis, Birmingham, Indianapolis) routinely reach 6–8%. Always compare a property to others in the same market rather than to a universal benchmark.
How is cap rate calculated?+
Cap rate = Net Operating Income (NOI) ÷ purchase price × 100. NOI is your effective gross rent (gross rent minus vacancy) minus all operating expenses — property tax, insurance, maintenance, management, and repairs. Crucially, NOI excludes your mortgage payment and income tax, so cap rate reflects the property's return independent of how it is financed.
Why does cap rate ignore the mortgage?+
Cap rate is designed to compare properties on their own merits, regardless of financing. Two investors could buy the same building with very different loans; excluding debt service lets the cap rate describe the asset itself. To factor in your specific loan, use cash-on-cash return or a full cash-flow analysis instead.
What is the 50% rule and when should I use it?+
The 50% rule is a screening shortcut that assumes total operating expenses — management, maintenance, taxes, insurance, and vacancy, but not the mortgage — run about 50% of gross rent. It is useful for a fast first-pass estimate when you don't yet have real expense figures. Once you have actual numbers, enter them for a more accurate cap rate.
Is a higher cap rate always better?+
Not necessarily. A high cap rate can signal strong cash flow, but it can also flag higher risk — a weaker location, deferred maintenance, or optimistic rent assumptions. A very low cap rate often reflects a premium, appreciation-focused market. The right cap rate depends on your strategy and the local market.
Found a deal that clears the bar? Run the full numbers.
Back to the calculator ↑Cost ranges and rates here are checked against contractor quotes and published industry data. If a number still looks off, email Support@RealCostIQ.com and we'll review and fix it.