Rental property income

Cap Rate Calculator

Measure unlevered property yield from effective income, operating expenses, and total acquisition cost.

Capitalization rate

7.3%

Net operating income

$23,200

Total property cost$320,000

Effective gross income$35,200

Operating expenses$12,000

Expense ratio34.1%

Gross rent multiplier8.89×

Cap rate excludes financing, income tax, depreciation, appreciation, and capital expenditures. Compare properties using consistent expense assumptions.

How cap rate is calculated

Effective gross income subtracts vacancy from rent and adds other income. Net operating income subtracts operating expenses. Cap rate divides NOI by purchase price plus entered closing and renovation costs.

Limitations

Debt service, depreciation, income tax, appreciation, capital replacements, and sale costs are excluded. Negative NOI produces a negative cap rate.

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Planning guide

Read the complete guide →

Understand this estimate before using it

Quick answer

What does the Cap Rate Calculator do?

Calculate NOI, cap rate, expense ratio, and gross rent multiplier. It calculates net operating income before financing and divides it by property value or price, alongside expense ratio and gross-rent measures.

Formula and calculation method

It calculates net operating income before financing and divides it by property value or price, alongside expense ratio and gross-rent measures.

The result is only as reliable as the inputs. Use current balances, rates, fees, dates, and documents; then change uncertain assumptions to see whether the conclusion remains stable.

How to interpret the result

Treat the output as a comparison or planning range, not a quote, approval, eligibility decision, tax return, or prediction. Review the breakdown—not only its headline number—and read every stated exclusion.

For current background, review HUD homebuying resources. Product documents and official program tools control when they differ from this educational model.

Worked scenario

Put the result in context

For a $400,000 property, list acquisition cash, annual operating income and expenses, financing, reserves, and expected selling costs separately. Test a lower rent or sale value rather than assuming the base case is certain.

This scenario illustrates the method; it is not a quote, forecast, recommendation, or substitute for entering your actual facts.

Before you calculate

Gather current information before changing the defaults. A result based on verified records is more useful than a precise answer built from guesses.

purchase price and closing costs

Check the date, unit, and source of this input before entering it.

rent, vacancy, and other income

Check the date, unit, and source of this input before entering it.

operating expenses

Check the date, unit, and source of this input before entering it.

what the calculator leaves out: financing, taxes, and big repairs

Check the date, unit, and source of this input before entering it.

What the result can answer

It can show how the entered assumptions interact, provide a consistent comparison, and reveal whether changing one important input materially changes the estimate.

What the result cannot decide

It cannot confirm approval, eligibility, market pricing, future performance, legal or tax treatment, contract quality, or whether the choice fits every part of your finances.

A practical next-step workflow

01 · Verify
Compare the inputs with current statements, quotes, official rules, and product documents.
02 · Stress-test
Run a second case with a less favorable value for what the calculator leaves out: financing, taxes, and big repairs.
03 · Confirm
Replace the seller's figures with actual rent records, tax bills, insurance quotes, and realistic vacancy and repair costs, then re-run it before acting.

Frequently asked questions

Does cap rate include the mortgage?

No. Cap rate generally divides property net operating income before financing by property value or acquisition price.

Is rent versus buy only a financial decision?

No. Flexibility, stability, maintenance responsibility, and personal preferences also matter.

What can make this estimate differ from an actual result?

Timing, rounding, rate changes, fees, taxes, eligibility rules, product conventions, and facts not requested by this focused calculator can all create differences.

Which inputs deserve a second scenario?

Retest any input that is quoted rather than fixed, depends on future behavior, or materially changes the result. Conservative and optimistic cases reveal more than false precision.

What should I verify before making a decision?

Verify current statements, disclosures, official rules, taxes, fees, cancellation or prepayment terms, and the consequences of a less favorable outcome.

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Prepared by Loan Lyze Editorial and reviewed under the Loan Lyze editorial framework on November 8, 2026. Educational estimate only. See our methodology, editorial policy, and corrections policy.

Analyze unlevered income

How cap rate is calculated

Limitations