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Enter a property's purchase price, rent, and operating expenses to get its net operating income and capitalization rate. Cap rate is the cleanest way to compare two rentals without letting financing muddy the comparison.
These are estimates from the numbers you entered. Want them calculated from real comparable rentals for a specific address?
Run a free CMA →Capitalization rate — cap rate — is the return a property produces on its purchase price, ignoring how you financed it. Because the mortgage is deliberately excluded, two investors paying cash and borrowing 80% get the same cap rate on the same building. That's what makes it useful for comparison.
Operating expenses are the costs of running the property: taxes, insurance, maintenance and repairs, property management, HOA dues, landscaping, utilities you pay, and a vacancy allowance. Mortgage principal and interest are not operating expenses. Neither is depreciation or capital improvements like a new roof.
| Line item | Amount |
|---|---|
| Purchase price | $250,000 |
| Gross annual rent ($2,200 × 12) | $26,400 |
| Less 5% vacancy | −$1,320 |
| Effective gross income | $25,080 |
| Property tax | −$3,200 |
| Insurance | −$1,400 |
| Maintenance | −$2,500 |
| Management (8% of EGI) | −$2,006 |
| Net operating income | $15,974 |
| Cap rate | 6.39% |
Cap rate is only as good as the rent number you feed it. A 7% cap on an inflated rent assumption is a 5% cap in reality.
The rent number drives everything above. CompPilot pulls actual comparable rentals for any US address and returns a defensible rent range — plus cap rate, DSCR, cash flow, and a written market memo.
Get a free rental analysis →It depends entirely on the market. In high-cost metros like San Francisco or Seattle, 3–4% is normal because buyers price in appreciation. In the Midwest and Southeast, 6–9% is common. The useful comparison is against other properties in the same market — a 6% cap in a market where everything trades at 5% is worth a look.
No. Cap rate deliberately excludes debt service so you can compare properties independent of financing. If you want a return figure that accounts for your loan, use cash-on-cash return instead.
Both. Cap rate tells you how the asset performs; cash-on-cash tells you how your money performs. A property can have a mediocre 5% cap rate but a strong 12% cash-on-cash if you financed it well. Lenders care about neither directly — they look at DSCR.
Use market rent if you're underwriting a purchase, because that's what you'll be able to charge after the current lease rolls. Use actual rent if you're valuing the property as-is with leases in place. The gap between the two is often where the opportunity is.
No. Cap rate is a risk-adjusted return — higher caps generally mean higher risk. A 12% cap property in a declining neighborhood with 1970s mechanicals may underperform a 6% cap property in a growing suburb once you account for vacancy, turnover, and capital expenditures.
If you run a real estate blog, brokerage, lending, or property management site, you can embed this cap rate calculator free — two lines of HTML, no API key, no signup, unlimited page views. All the math runs in the visitor's browser, and it renders in an isolated shadow root so it can't collide with your site's styles.
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