Cap Rate Calculator

Compare annual property operating income with a stated property value. Use an existing NOI figure or build one from rent, vacancy, effective other income and operating expenses.

CurrencyUse one currency for all amounts. This changes labels only; it does not convert money or change local rules.

Calculate

Net operating income input

Property value / comparison priceUSDUse a clearly identified market value or proposed purchase price, not your down payment.

Assumed capitalization rate%Value mode only. Enter a supported assumption; no market rate is supplied.

Annual net operating incomeUSD/yearBefore debt service, income tax, depreciation and capital expenditure. Negative NOI is supported in cap-rate mode.

Income and expense amounts areChanging this converts rent, other income and operating expenses.

Potential gross rentUSD/monthBefore the entered vacancy and credit-loss allowance.

Rent vacancy and credit loss%Applied to potential rent only. Do not reduce rent twice if it is already net of these losses.

Effective other operating incomeUSD/monthAlready net of its own expected losses; the rent vacancy percentage is not applied again.

Operating expensesUSD/monthInclude appropriate recurring property costs. Exclude mortgage principal/interest, income tax, depreciation and capital improvements.

Calculation results

Property capitalization rate

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How to use this calculator

Choose a consistent value basis

Use the property’s value or comparison purchase price. Cap rate measures operating income relative to the asset value, not income relative to the investor’s cash deposit.

Enter or assemble annual NOI

Direct mode accepts an annual figure. Build mode annualizes the entered income and operating expenses, then deducts the rent-specific vacancy allowance once.

Keep financing separate

Mortgage payments and owner financing costs are not operating expenses in this model. Capital spending and depreciation are also not deducted as recurring operations.

Interpret the ratio with its assumptions

Rate mode can show a negative ratio when operations lose money. Value mode requires positive NOI and a positive assumed cap rate; it does not determine a property’s actual market price.

Formula and worked example

Annual potential rent = entered rent × 12 (monthly mode) or × 1 (annual mode)
Vacancy loss = annual potential rent × vacancy percentage ÷ 100
Effective gross income = annual potential rent − vacancy loss + annual effective other income
NOI = effective gross income − annual operating expenses
Cap rate (%) = annual NOI ÷ property value × 100
Direct-capitalization value = annual NOI ÷ (assumed cap rate ÷ 100)

Monthly potential rent of 3,000 gives 36,000 annually. A 5% rent loss removes 1,800; effective other income of 150 per month adds 1,800. Subtracting 800 per month in operating expenses leaves annual NOI of 26,400. At a property value of 440,000, the cap rate is 6%. Using the same NOI and an assumed 6% rate in value mode returns 440,000.

Same annual NOI, different assumed cap rates

Illustrative direct-capitalization arithmetic. These rates are not market benchmarks or recommendations.
Annual NOI	Assumed rate	Implied value
26,400	5%	528,000
26,400	6%	440,000
26,400	8%	330,000

Frequently asked questions

Do I include mortgage payments in NOI?

No. This model treats debt service as financing, separate from the property’s operating income. Including loan payments changes the metric and prevents a like-for-like cap-rate comparison.

Is cap rate the same as cash-on-cash return?

No. Cap rate uses property value and NOI before financing. Cash-on-cash return compares investor cash flow with cash invested and can change with leverage.

What is a good cap rate?

There is no universal threshold provided here. Location, property type, condition, lease quality and the income basis affect comparisons. The calculator does not score investments or supply live comparable transactions.

Can I enter negative NOI?

Yes in cap-rate mode, producing a negative operating-income ratio. A positive-rate direct-capitalization value is not produced for zero or negative NOI; assess that scenario with a more suitable valuation approach.

Does changing monthly to annual change the result?

The three income/expense amounts are converted together, preserving the modeled annual NOI. The direct NOI input is always annual and is not converted.

Methodology and sources

Single-period operating-income arithmetic in one currency. No rent growth, sale proceeds, financing, transaction costs or discounted multi-year cash flows are modeled. Ensure that trailing, forward or stabilized NOI and the comparison cap rate use compatible definitions, including any reserve treatment. No market data or investment advice is embedded.

JPMorganChase — cap rates explained — Definition of cap rate as annual NOI divided by property value.
JPMorganChase — NOI and cash flow — Operating income versus financing cash flow; debt service is outside NOI.
CFA Institute — property valuation methods — Context for direct capitalization and the distinction between NOI and capital spending.

Sources checked September 1, 2026. Referenced organizations do not endorse Efficienco. Income and rates retain full precision until display. This is a user-input valuation ratio, not a market appraisal or investment recommendation.