Cap rate calculator for rental and commercial property
The capitalisation rate — cap rate — is the yearly net operating income of a property divided by its value. This cap rate calculator builds the NOI for you from rent, vacancy and itemised running costs, then gives the cap rate, gross yield, gross rent multiplier and operating expense ratio. Switch to Find value to turn a target cap rate into a price, the way appraisers and commercial brokers value income property.
Because people often ask for a “cap rate calculator with mortgage”, there is an optional financing panel too: it adds the loan payment (the same amortisation formula as the site’s loan tools), cash flow, cash-on-cash return and the debt service coverage ratio, and says whether borrowing helps or hurts. Defaults are available for the US, UK, UAE, Australia and India. Results are estimates, not investment advice.
How to use the Cap Rate Calculator
- Pick Find cap rate or Find value, and your Country to load local example figures and currency.
- Enter the Property value or price (or a Target cap rate), the Rent a month and any Other income.
- Fill in Operating costs: vacancy, property tax, insurance, HOA or service charge, management, repairs, utilities and other costs.
- Read the cap rate and NOI; the bar shows where every unit of rent goes.
- Optionally set the down payment, rate, term and purchase costs to see cash flow, cash-on-cash return and DSCR.
Cap Rate Calculator features
Two directions
Cap rate from value, or value from a target cap rate — plus a table of values at 3% to 10%.
NOI built line by line
Vacancy, percentage-based management and repairs, and fixed yearly costs, with the expense ratio shown.
Financing without confusing the cap rate
Mortgage payments are kept out of NOI, as they should be, and shown separately as cash flow, cash-on-cash and DSCR.
Leverage check
Compares the cap rate with the loan constant so you can see when a mortgage lowers your return.
Local defaults
Council tax, service charges, strata, DLD fees and society maintenance are reflected in each country’s example.
Cap rate formula and worked example
Cap rate = net operating income ÷ property value × 100. NOI is the rent you actually collect (after vacancy and bad debt) plus other income, minus operating costs: property tax, insurance, management, repairs, HOA or service charges, owner-paid utilities and other running costs. It excludes mortgage payments, depreciation, income tax and big capital projects.
Example: a $400,000 house rents for $3,000 a month. With 5% vacancy, collected rent is $34,200 a year. Property tax $4,800, insurance $1,800, management 8% and repairs 5% of collected rent ($4,446) and $600 of other costs total $11,646, leaving NOI of $22,554 and a cap rate of 5.64%. Gross yield is 9% and the gross rent multiplier 11.11.
Valued at a 6% cap rate instead, the same NOI supports a price of $22,554 ÷ 0.06 = $375,900. A lower cap rate means a higher price for the same income.
Cap rate with a mortgage: cash-on-cash and DSCR
Buy the same house with 25% down and a 7%, 30-year loan of $300,000 and the payment is $1,995.91 a month, or $23,951 a year — more than the NOI. Cash flow is −$1,397 a year, the cash-on-cash return on $112,000 invested (down payment plus 3% purchase costs) is −1.25%, and the DSCR is 0.94. This is negative leverage: the 5.64% cap rate is below the 7.98% loan constant, so borrowing makes the return worse. A larger down payment, a lower rate or higher rent would flip it.
| Measure | Formula | Example |
|---|---|---|
| Cap rate | NOI ÷ value | 5.64% |
| Gross yield | Yearly rent ÷ value | 9.00% |
| Gross rent multiplier | Value ÷ yearly rent | 11.11 |
| Cash-on-cash return | Cash flow ÷ cash invested | −1.25% |
| DSCR | NOI ÷ yearly debt service | 0.94 |
Using cap rates sensibly
- Compare cap rates only between similar properties in similar locations; investors accept lower cap rates where they expect rents and values to grow or risk to be low.
- Use realistic, stabilised figures. A cap rate on a seller’s pro-forma with no vacancy or management looks better than it is.
- For a return that includes appreciation and loan paydown over years, use the ROI calculator; for holiday lets, the short-term rental calculator; for buying costs, the closing cost calculator.
Cap Rate Calculator FAQ
What is a good cap rate for rental property?
There is no single good number: it depends on location, property type, interest rates and risk. Compare against recent sales of similar properties nearby, and check that the cap rate beats your borrowing cost if you use a mortgage.
Does the cap rate include the mortgage?
No. Cap rate measures the property’s income regardless of how it is financed. This cap rate calculator shows the mortgage effect separately as cash flow, cash-on-cash return and DSCR.
How do I calculate property value from a cap rate?
Divide the yearly NOI by the cap rate as a decimal: $22,554 ÷ 0.06 = $375,900. Choose Find value and enter the target cap rate.
What is the difference between cap rate and rental yield?
Gross rental yield divides yearly rent by the price, before any costs. Cap rate uses net operating income, after vacancy and running costs, so it is always lower.
Can I use this as a cap rate calculator for commercial real estate?
Yes. Enter total rent from all units or tenants, other income and the landlord’s operating costs. For triple-net leases where tenants pay most costs, enter only the costs you bear.
How do I do this in Excel?
Put collected rent minus operating costs in one cell (NOI) and divide by the value: =NOI/Value. The table here gives the same results and lets you test other cap rates instantly.