Free cap rate calculator & rental deal analyzer

The capitalization rate (cap rate) is a property's annual net operating income (NOI) divided by its value, expressed as a percent. It estimates the unleveraged annual return a rental would produce if you bought it for cash, which is why real-estate investors use it to compare properties independently of how each one is financed.

Cap rate = NOI ÷ property value × 100. First build NOI: start from effective gross income (gross rent minus a vacancy allowance, plus any other income), then subtract operating expenses such as taxes, insurance, management, and maintenance — vacancy is already removed inside effective gross income, so it isn't subtracted again. Then divide NOI by the purchase price or market value. For example, $12,000 of NOI on a $200,000 property is a 6% cap rate.

No. Cap rate is an unleveraged metric, so NOI never subtracts your mortgage payment, principal, interest, depreciation, or income tax. Subtracting the loan is the single most common cap-rate mistake. To see how financing affects your actual return, look at cash-on-cash return and cash flow instead, which this calculator also reports.

It depends on the market, property type, and risk, so treat any number as a rough rule of thumb. Many residential investors view roughly 5–8% as reasonable; this tool reads about 6–10% as a healthy residential range, under ~4% as thin, and — importantly — above ~10% as a flag to double-check rather than a bargain, because a very high cap rate usually signals higher risk, a weaker location, or optimistic inputs. Always compare against local comparable sales.

NOI is the income a property produces after operating expenses but before financing and taxes. It equals effective gross income (gross rent minus a vacancy allowance, plus any other income) minus operating expenses such as property tax, insurance, management, maintenance, owner-paid utilities, and HOA dues.

Included: property tax, insurance, property management, repairs and maintenance, owner-paid utilities, HOA dues, and similar recurring operating costs. Excluded: mortgage principal and interest, depreciation, income taxes, and capital expenditures. Capital reserves are kept below the NOI line so cap rate stays comparable to market comps; this calculator still subtracts them when computing cash flow.

No. NOI is calculated before depreciation, financing, and income tax. Depreciation is a non-cash tax deduction, not an operating cost, so it never reduces NOI or the cap rate. It only affects your tax return, which is outside what this calculator models.

Not quite. NOI is property-level operating profit before debt service, capital expenditures, depreciation, and income tax — similar in spirit to EBITDA for a single property. Your actual take-home profit is cash flow, which subtracts the mortgage and a capital-expense reserve from NOI; the calculator reports both.

Cap rate is unleveraged — NOI ÷ price — and ignores your loan. Cash-on-cash return is leveraged: it divides your annual pre-tax cash flow (after the mortgage and reserves) by the actual cash you invested (down payment + closing costs + upfront rehab). Two buyers of the same property share its cap rate but have different cash-on-cash returns depending on their financing.

Cash-on-cash return is your leveraged, first-year cash yield: annual pre-tax cash flow (after debt service and any capital-expense reserve) divided by the total cash you invested — down payment plus closing costs plus upfront rehab. It answers "what return is my actual cash earning this year?" in a way cap rate can't, because cap rate ignores financing.

A common target is around 8% or higher, but it varies with market, leverage, and risk. This calculator reads roughly 8%+ as strong and below ~4% as weak, with the middle being acceptable but not exciting. Like every benchmark here, it's a screening rule of thumb, not a target or advice.

No. Cash-on-cash is a single-year, cash-only return: this year's cash flow divided by the cash you put in. It deliberately ignores loan paydown, appreciation, and taxes. A full return on investment over a holding period adds principal paydown, appreciation, and the proceeds from a sale — which this tool reports separately as total profit, equity multiple, annualized return, and IRR.

A simple first-year return divides your annual benefit — cash flow plus the principal you paid down plus appreciation — by the cash you invested. Over a multi-year hold, a truer figure accounts for the eventual sale, which is why this calculator also reports total profit, equity multiple, an annualized return, and the internal rate of return (IRR) across your chosen hold period.

The debt service coverage ratio is NOI ÷ annual debt service (principal + interest). It tells a lender how comfortably the property's income covers its loan. A DSCR of 1.0 means income exactly covers the payment; many DSCR-loan programs want about 1.20–1.25 or higher. Below 1.0, the property does not cover its debt from operations.

Cash flow = NOI − annual debt service − any capital-expense reserve, reported here both monthly and yearly. Positive cash flow means the property puts money in your pocket each month after the mortgage and reserves; negative cash flow means it costs you money to hold.

GRM = purchase price ÷ annual gross rent. It's a fast comparison ratio: a lower GRM means you're paying less per dollar of rent. Because it ignores operating expenses, vacancy, and financing, GRM is a quick screen, not a substitute for cap rate or cash flow.

Lower is generally better, and typical residential GRMs often land somewhere around 4 to 8 depending on the market — but because GRM ignores expenses and financing entirely, it's only a first-pass filter. Confirm any GRM-based hunch with the cap rate, cash flow, and cash-on-cash return before drawing conclusions.

The 1% rule is a quick screen: monthly rent should be at least 1% of the purchase price (for example, $2,000 rent on a $200,000 home). Passing it suggests the deal may cash flow; failing it is common in higher-priced markets and is not disqualifying on its own. It is a filter, not a valuation.

The 50% rule estimates that operating expenses (excluding the mortgage) will run about half of gross rent over time. It's a back-of-the-envelope sanity check, useful before you have real expense numbers. Once you enter actual expenses here, rely on those instead of the estimate.

Use the purchase price to judge the return on what you're actually paying — that's this calculator's default. The textbook denominator is current market value, which tells you whether the asking price is fair. If you enter a separate market value, the tool shows a second cap rate against it so you can compare.

That depends entirely on the specific deal and your goals — which is exactly what this tool helps you screen. A property that cash flows positively, clears a lender's DSCR, and shows a healthy cap rate and cash-on-cash return for your market is a stronger candidate than one that doesn't. Run your real numbers; this is education, not investment advice.

Yes, it's completely free with no account, no email, and no usage limits. Every calculation runs in your browser, so the numbers you enter are never uploaded to a server. You can copy a shareable link that encodes your inputs to revisit a scenario or send it to a partner.

Every metric is implemented in a single, typed calculation module covered by unit tests, and each formula and convention was cross-checked against multiple independent, authoritative real-estate references before launch. Results still depend on your inputs and assumptions and are for education only — not investment, tax, or financial advice.