Cap Rate Calculator (NOI, Gross Rent Multiplier, Cash Flow)
Enter a purchase price, the rent, a vacancy allowance, and each operating expense to get the cap rate, net operating income, and gross rent multiplier. Add a mortgage payment to see monthly cash flow after financing, and the table shows how the cap rate shifts with the price you pay.
What you would pay for the property
Market rent for comparable units, not the listing's hope
Share of rent lost to empty months and turnover
Principal and interest on your loan, to see cash flow after financing
Cap rate
5.69%
NOI divided by the purchase price; financing ignored
NOI (annual)
$17,060
$27,360 effective rent minus $10,300 expenses
Gross rent multiplier
10.4
price divided by $28,800 of annual gross rent
Monthly NOI (no loan)
$1,422
before any loan; add a mortgage payment to see leveraged cash flow
Same building, different price
| Scenario | Purchase price | Cap rate | Gross rent multiplier |
|---|---|---|---|
| -20% | $240,000 | 7.11% | 8.3 |
| -10% | $270,000 | 6.32% | 9.4 |
| Your price | $300,000 | 5.69% | 10.4 |
| +10% | $330,000 | 5.17% | 11.5 |
| +20% | $360,000 | 4.74% | 12.5 |
NOI stays fixed across these rows, so the cap rate moves only with the price. In practice property taxes are often reassessed after a sale, which nudges NOI as well.
What the cap rate measures, and what it deliberately ignores
Cap rate, short for capitalization rate, is the yield a property would produce if you paid cash: net operating income divided by the purchase price. It ignores financing on purpose. Whether you borrow 75% or nothing changes your personal return, not the building's ability to produce income, so stripping the loan out lets you compare a duplex bought with cash against one bought with a mortgage. It also ignores appreciation, income taxes, and depreciation, which makes it a measure of current income rather than total return.
The arithmetic, line by line
Start with annual gross rent, subtract a vacancy allowance, and you have effective gross income. Subtract every operating expense (taxes, insurance, maintenance, management, and the odds and ends) to reach net operating income, or NOI. Divide NOI by the price and you have the cap rate; divide the price by gross rent and you have the gross rent multiplier. A worked example: a $300,000 property renting for $2,400 a month grosses $28,800 a year. A 5% vacancy allowance takes $1,440, leaving $27,360. Operating expenses of $10,300 bring NOI to $17,060, which is a 5.69% cap rate and a gross rent multiplier of 10.4. Pay $270,000 for the same building and the cap rate rises to 6.32%; pay $330,000 and it falls to 5.17%. The income never moved, only the price did. Property taxes are the line most likely to change after a sale, and the property tax calculator estimates what a reassessment does to it.
Cap rate versus cash-on-cash return
Cap rate answers what the building earns. Cash-on-cash answers what your money earns. Once a mortgage enters, the loan payment comes out of NOI and what remains is cash flow, measured against the cash you actually put in. In the example, a $1,500 monthly loan payment set against $1,422 of monthly NOI leaves a slightly negative cash flow, and that is the quiet lesson in this tool: when the cap rate sits below the mortgage rate, leverage subtracts instead of adding. The rental property calculator runs the full model with a down payment, a loan, and rent growth.
The 1% rule, and when this number earns its keep
You will hear that monthly rent should be at least 1% of the price. It is a screen, not a law: the example above rents at 0.8% and still clears a mid-5% cap rate, while a 1% property with heavy taxes and an aging roof could do worse. Treat the cap rate as the fast, honest way to compare properties on income alone, to sanity-check a listing's claims, and to negotiate, since every dollar shaved off the price lifts the yield. Run it before an offer, again after the inspection changes the expense lines, and whenever lender rates move relative to it.
Frequently asked questions
What is a good cap rate for a rental property?
There is no single right number; it depends on the market and the risk. Cap rates tend to be lower in expensive, high-demand areas where buyers accept a thinner yield for stability and appreciation, and higher in cheaper markets or older buildings where more can go wrong. A useful habit is comparing a property's cap rate to similar properties nearby and to what a mortgage costs: when the cap rate sits below the loan rate, leverage works against you.
Does the cap rate include the mortgage?
No. Cap rate is net operating income divided by price, and NOI is measured before any loan payment. That is deliberate: it lets two buyers with different financing compare the same building on equal terms. To see what your specific loan does to the returns, add a mortgage payment for the cash-flow figure, or use the full rental property calculator for cash-on-cash return.
What counts as an operating expense?
Recurring costs of running the property: property taxes, insurance, maintenance and repairs, a reserve for big replacements, management fees, HOA dues, and any utilities the owner pays. Vacancy is handled separately as a percentage of rent. Mortgage principal and interest, income taxes, and depreciation are not operating expenses.
How is the gross rent multiplier different from the cap rate?
GRM is the price divided by annual gross rent, before vacancy and expenses, so it is a quicker but cruder screen. Two properties with the same GRM can have very different cap rates if one carries high taxes or an old roof. Use GRM to shortlist and cap rate to compare.
Can I use the cap rate to estimate what a property is worth?
Yes, by flipping the formula: value equals NOI divided by the cap rate typical for similar properties in that market. If comparable rentals trade at a 6% cap rate and this one produces $17,000 of NOI, the math suggests a value near $283,000. It is an estimate that depends heavily on the cap rate you pick, so treat it as a range, not a price.
Does this calculator save my numbers?
No. Everything runs in your browser and nothing you type is stored or sent anywhere.
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