How do you calculate Cap Rate for a rental property?
Short answer: Cap Rate = NOI ÷ Purchase Price. Enter your gross rent, operating expenses and purchase price to see the unleveraged annual return and how it benchmarks against market bands.
Formula
Cap Rate = Net Operating Income ÷ Purchase Price
Net Operating Income
$32,000
Annual NOI after operating expenses.
Cap Rate
8.00%
Strong. Above-market yield — usually secondary markets or a value-add angle.
How to use this calculator
- Enter gross annual rent. Use realistic market rent — check comparable rentals within 0.5 miles.
- Enter annual operating expenses. Include taxes, insurance, HOA, management (8–10% of rent), maintenance (5–10%) and vacancy (5–8%).
- Enter purchase price. Use the all-in acquisition cost: price + closing costs + any immediate repairs.
- Read the Cap Rate. The result is your unleveraged annual return — use it to compare properties on equal footing.
FAQ
What Cap Rate is considered "good"?
For U.S. single-family rentals in 2026: 5–8% is solid, 8–10% is strong, above 10% warrants extra due diligence on condition, neighborhood and tenant stability.
Does Cap Rate include the mortgage?
No. Cap Rate is an unleveraged return. To include financing impact, use the Cash-on-Cash Return calculator instead.
What counts as an operating expense in NOI?
Property taxes, insurance, HOA fees, property management, repairs and maintenance, vacancy allowance and landlord-paid utilities. Mortgage payments, depreciation and capital improvements are excluded.