Work out capitalisation rate, net operating income, cash flow and cash-on-cash return for a rental property.
How the cap rate calculator works
Cap rate is net operating income divided by purchase price, and it deliberately ignores financing so that two properties can be compared on the asset itself rather than the buyer’s loan terms.
Cash-on-cash return does the opposite — it measures what your actual invested cash earns after debt service. Both numbers matter, and they can point in different directions on the same deal.
Worked example
On the values this calculator opens with, the capitalisation rate is 6.35%. Underneath, Gross scheduled income comes out at $31,200 and Effective gross income at $29,328. Change any field and every figure updates as you type.
Step by step
- Enter the purchase price and gross monthly rent.
- Set a vacancy allowance and annual operating expenses.
- Add your down payment and annual mortgage payments for cash-on-cash.
The calculation
effective gross income = rent × (1 − vacancy)
NOI = effective gross income − operating expenses
cap rate = NOI ÷ price · cash-on-cash = cash flow ÷ cash invested
FAQ
What is a good cap rate?
It depends entirely on the market. Lower cap rates usually mean lower perceived risk and higher prices; higher ones often come with more risk or work.
Does NOI include the mortgage?
No. Debt service is excluded deliberately so the property can be evaluated independently of how it is financed.
What expenses count as operating?
Taxes, insurance, management, maintenance, and reserves. Mortgage payments, depreciation and capital improvements do not.