Cap Rate Calculator

Finance Updated 16 Jun 2026

Calculate the capitalization rate (cap rate) of a rental property — the annual return relative to its value. Enter the annual rental income, operating expenses, and property value, and this calculator returns the net operating income (NOI), cap rate, and gross yield.

Formula

NOI = Annual Rental Income − Annual Expenses Cap Rate = NOI / Property Value × 100 Gross Yield = Annual Rental Income / Property Value × 100
  • Net operating income (NOI) is your annual rental income minus annual operating expenses (before mortgage payments).
  • Cap rate = NOI ÷ property value × 100 — the unleveraged annual return on the property.
  • Gross yield uses rental income before expenses, so it's always higher than the cap rate.
  • Higher cap rates suggest higher return (and often higher risk); lower cap rates suggest pricier, lower-risk markets.
  • Cap rate ignores financing — it lets you compare properties regardless of how they're funded.
  • Enter amounts in your local currency; the percentages are unaffected by the currency used.

$24,000 rent, $4,000 expenses, $320,000 value

Inputs
  • Annual Rental Income: 24000
  • Property Value: 320000
  • Annual Operating Expenses: 4000

NOI = $24,000 − $4,000 = $20,000. Cap rate = $20,000 ÷ $320,000 × 100 = 6.25%. Gross yield = $24,000 ÷ $320,000 × 100 = 7.5%.

Frequently asked questions

What is a good cap rate?
It depends on the market and risk. Many investors look for 5–10%. Lower cap rates are common in prime, low-risk areas; higher cap rates appear in riskier or higher-yield locations.
What's the difference between cap rate and gross yield?
Gross yield uses rental income only; cap rate uses net operating income (after expenses). Cap rate is the more realistic measure of return.
Does cap rate include the mortgage?
No. Cap rate is unleveraged — it deliberately ignores financing so you can compare properties on equal footing. For leveraged returns, look at cash-on-cash return instead.
What counts as operating expenses?
Recurring costs to run the property: management, maintenance, insurance, property tax, and vacancy allowance. It excludes mortgage payments and large capital improvements.