Cap Rate Calculator: The Unlevered Yield
Enter the price, the rent, and the operating expenses — get the capitalization rate, net operating income, gross rent multiplier, and expense ratio, plus what the income is worth at any market cap rate. Honest defaults, live math.
Property & Income
Auto-calculated (1% of value/yr)
Cap Rate
11.28%
Annual NOI
$33,852
GRM
6.3
Expense Ratio
25.8%
Higher yield — Higher cap rates usually mean stronger cash flow and higher-risk or secondary markets. What counts as “good” is entirely market-specific.
How the Cap Rate Is Built (Monthly)
Cap rate = annual NOI ($33,852) ÷ value ($300,000) = 11.28%. No mortgage in this math — cap rate measures the property, not the financing.
Operating Expense Breakdown
$979
per month
What the Income Is Worth
Capitalizing this property’s NOI at a 6% market cap rate — the appraiser’s income approach in one line.
$264,200 of value above your price at this cap rate
Cap rate is the asset. Financing is the deal.
A strong cap rate is only half the picture — how you finance it decides your actual return. Run the deal with the desk on the property’s cash flow, no tax returns.
Run My Numbers2 minutes · No documents · No tax returns
What is a cap rate?
The capitalization rate is a property’s unlevered annual yield: net operating income divided by value. If a building produces $18,000 of NOI a year and costs $300,000, its cap rate is 6% — the return the asset throws off before any mortgage enters the picture. That last clause is the whole reason the metric exists: cap rate measures the property, not your financing, so two investors with completely different loans read the same cap rate on the same building and can compare it against every other building on the market.
How do you calculate cap rate?
Two steps. First build net operating income: start with gross scheduled rent plus any other income, subtract a vacancy allowance to get effective gross income, then subtract every operating expense — property taxes, insurance, management, repairs, utilities you pay, HOA dues, reserves. What’s left is NOI. Second, divide NOI by the price or value and multiply by 100. The calculator above shows the whole waterfall so you can see exactly where the number comes from — and critically, NOI excludes your mortgage payment, income taxes, and capital improvements, because none of those belong to the property itself.
What is a good cap rate?
The honest answer is that “good” is entirely local, and anyone quoting a national number is selling something. A 5% cap rate is excellent in a supply-constrained coastal market and mediocre in a cash-flow Midwest metro. The useful framing is a spectrum: higher cap rates (roughly 8%+) usually mean stronger current cash flow paired with higher risk or secondary markets; lower cap rates (under 5%) usually mean appreciation-driven primary markets where investors accept less yield for growth; the middle is where most stabilized rentals trade. The only comparison that means anything is against recent sales of similar properties in the same submarket — which is exactly what the value tool in the calculator helps you sanity-check.
Cap rate vs. the other numbers
Cap rate has a specific job, and it’s easy to ask it to do jobs it can’t. It is not your return on invested cash — that’s cash-on-cash, which is levered and depends on your loan. It is nota qualification test — that’s DSCR, which divides rent by the payment. And GRM (price ÷ gross rent) is a cruder cousin that ignores expenses entirely, useful only for the fastest first-pass screen. Cap rate sits in the middle: expense-aware but financing-blind, the cleanest single number for comparing one asset to another. Use our DSCR calculator when the question shifts from “is this a good asset?” to “will this deal qualify and cash-flow?”
The trap: seller math
The single most common way investors get burned on cap rate is trusting the one in the listing. Marketed cap rates are computed on proforma NOI — vacancy understated, management omitted because “you’ll self-manage,” reserves and real repair budgets quietly missing. Every one of those omissions inflates the cap rate. Rebuild NOI from fully-loaded, honest expenses before you believe any number a broker hands you. This calculator defaults to real assumptions — 5% vacancy, 8% management, a 1%-of-value repair reserve — for exactly that reason. Adjust them to your own diligence, never to make the deal look prettier.
Put this calculator on your website
Agents, property managers, and investor educators: embed the cap rate calculator free with one line of HTML. It sizes itself to any page and keeps working as we improve it.
Embed this calculator on your site
<script src="https://onemoredoor.com/omd-embed.js" data-calc="cap-rate"></script>Free to use — paste it where the calculator should appear and it sizes itself. Attribution stays part of the tool. Want it in your brand colors with your name on it? A partner program is coming — watch this page.
Should property management be included in cap rate expenses?
Yes — professional practice includes management in NOI whether or not you self-manage, because the property’s value shouldn’t depend on your free labor. This calculator includes it by default. If you strip it out to flatter the number, you’re comparing your deal against other people’s fully-loaded ones, which is not a comparison.
Does cap rate include the mortgage?
No, and that’s the entire point of the metric. Cap rate is unlevered — NOI divided by value, with no debt service anywhere in the math. It measures the property itself, so two investors with different loans see the same cap rate on the same building. For your actual after-financing return, look at cash-on-cash instead.
What’s the difference between cap rate and cash-on-cash return?
Cap rate is the property’s unlevered yield: NOI over price. Cash-on-cash is your levered return: annual cash flow after the mortgage, over the actual cash you invested. Cap rate compares assets; cash-on-cash measures your deal. A modest cap rate can produce a strong cash-on-cash return once smart financing is applied — which is exactly the gap the loan side fills.
How do I use the value-at-target-cap tool?
Enter a market cap rate — what comparable properties nearby are trading at — and the calculator capitalizes this property’s NOI at that rate to show what the income is worth. It’s the appraiser’s income approach in one line: if the supported value sits above your price, the income justifies it; if below, you’re paying for something other than current cash flow.
Why does the same property show different cap rates in different listings?
Because sellers compute NOI generously — understating vacancy, omitting management, forgetting reserves — which inflates the cap rate. Always rebuild NOI from real, fully-loaded expenses before trusting a marketed cap rate. This calculator defaults to honest assumptions for exactly that reason; adjust them to your diligence, not the listing’s.
Great asset? Now price the deal.
Cap rate tells you the property is good. Financing decides your return. Run the deal with the desk — qualified on the rent, not your tax returns.
2 minutes · No documents · No tax returns