Cap Rate Calculator: Net Operating Income and Property Value
Work out a rental property's net operating income and capitalization rate from rent, vacancy and operating expenses, and the price that matches a target cap rate
By the Monthly Income Booster editorial team · Updated · How we research and fact-check
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Cap Rate Calculator: Net Operating Income and Property Value
Printed 2026-10-27 from billorganizingapp.com/income/calculators/cap-rate/ — an estimate for planning, not financial or tax advice.
Excludes mortgage payments, depreciation and income tax. Operating expenses: property tax, insurance, repairs, management, HOA, owner-paid utilities.
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Enter the property's price or value, the monthly rent, any other yearly income, a vacancy allowance and the yearly operating expenses — property tax, insurance, repairs and maintenance, management, HOA dues and any utilities the owner pays. Leave out the mortgage: cap rate measures the property itself, not how it is financed. The calculator shows gross income, net operating income (NOI), the cap rate, the gross rent multiplier and the price at a target cap rate.
The cap rate formula
Cap rate = NOI ÷ property value, where NOI = gross rent + other income − vacancy − operating expenses. A $300,000 property renting for $2,500 a month brings in $30,000 a year; minus 5% vacancy ($1,500) and $9,000 of expenses, NOI is $19,500 and the cap rate is 6.50%. The gross rent multiplier (price ÷ gross yearly rent) is 10.0.
Price at a target cap rate
Turn the formula around and value = NOI ÷ cap rate. If similar properties nearby trade at a 6% cap rate, $19,500 of NOI points to about $325,000. A lower cap rate means a higher price for the same income.
| Cap rate | Implied value |
|---|---|
| 4% | $487,500 |
| 5% | $390,000 |
| 6% | $325,000 |
| 7% | $278,571 |
| 8% | $243,750 |
What cap rate doesn't include
Cap rate ignores the mortgage, so it isn't your cash return — use the rental cash flow calculator for payments and cash flow. It also leaves out income tax, depreciation and big one-off repairs. Rental income and expenses are reported on Schedule E, and IRS Publication 527 (2025) explains which expenses are deductible and that residential rental buildings are depreciated over 27.5 years. Rents, vacancies and expenses are your estimates; check them against the property's records.
Comparing properties
Cap rate is most useful for comparing similar properties in the same market at the same time. The internal rate of return (IRR) adds the timing of cash flows and the eventual sale price.
Refinancing and taxes
Model a value-add deal and cash-out refinance, or see what depreciation does to the property's taxable income.
Need the NOI figure first? How to calculate NOI on a rental property builds it line by line for a duplex, then turns it into cap rate, DSCR and cash flow.
Official sources
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.
Frequently Asked Questions
How do you calculate cap rate?+
Cap rate = net operating income ÷ property value. $19,500 NOI on a $300,000 property is 6.50%.
What is net operating income (NOI)?+
Yearly rent and other property income, minus vacancy and operating expenses such as property tax, insurance, repairs, management and HOA dues. Mortgage payments, depreciation and income tax are not subtracted.
Does cap rate include the mortgage?+
No. Cap rate describes the property as if bought with cash, so you can compare properties regardless of financing. Your cash-on-cash return and cash flow do include the loan.
How do I value a property from a cap rate?+
Value = NOI ÷ cap rate. $19,500 NOI at a 6% cap rate is about $325,000.
Is a higher cap rate better?+
A higher cap rate means more income per dollar of price, but it often comes with more risk, older buildings or weaker locations. A lower cap rate usually reflects higher prices and steadier demand.
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