Quickly measure a rental property's return with the industry-standard capitalization rate. Solve for the cap rate itself, the most you should pay to hit a target return, or the income a property needs to pencil out. Free, instant, and no email required.
The capitalization rate is a property's annual net operating income (NOI) divided by its price. It tells you the return the property itself produces before any mortgage, which makes it the fastest way to compare two deals apples-to-apples. Formula: Cap Rate = NOI ÷ Property Value × 100.
There's no single "good" number; it's a risk dial. 4% to 7% is typical for stable buy-and-hold rentals in decent markets; below 4% usually means a premium location with low risk and low income; 8% to 10% or higher usually signals higher risk, heavier management, or a market with declining values. Compare against similar properties in the same submarket, not a national average.
Cap rate ignores financing; cash-on-cash measures the return on the actual cash you put in after mortgage payments. Use cap rate to compare properties, cash-on-cash to judge your deal with your loan. Our Rental Property ROI Calculator computes both.
Add up all income (rent, parking, laundry, pet rent), subtract vacancy, then subtract operating expenses: property tax, insurance, maintenance, management, owner-paid utilities, HOA. Do not subtract mortgage payments, depreciation, or capital improvements. The calculator's "Help me calculate NOI" panel does this for you, or use the dedicated NOI Calculator.
Yes: 100% free, no account, no email, unlimited use. It's part of Advanced Collection Bureau's free toolkit for landlords and property managers.
No. Cap rate is intentionally financing-blind so you can compare properties regardless of how they're purchased. Debt service belongs in cash-on-cash and DSCR analysis.
For a purchase decision, use the price you'd actually pay (including known immediate repairs for an "all-in" view). For a property you already own, use current market value to see what your equity is earning.
Property taxes, insurance, repairs and maintenance, property management, owner-paid utilities, HOA dues, landscaping, pest control, legal/accounting, and advertising. Mortgage payments, capital expenditures, depreciation, and income taxes are excluded.
Investors accept lower yields where risk is lower and appreciation is stronger, and demand higher yields where vacancy, taxes, or volatility are higher. That's why a 5% cap can be great in one metro and terrible in another.
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