Cap rate calculator
Net operating income and cap rate, before any loan.
Cap rate
7.2%
- Net operating income
- $36,000
- Rent collected
- $45,600
How it's worked out
- Rent collected
rent per year × (1 − empty time) - Net operating income
rent collected − operating costs - Cap rate
net operating income ÷ property value × 100
A property is worth 500,000 and rents for 48,000 a year. With 5% empty time it collects 45,600. After 9,600 of operating costs, net operating income is 36,000 and the cap rate is 7.2%.
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What counts as operating costs?
The yearly costs of running the property: management, repairs, insurance, property tax, service charges and utilities you pay. Loan payments are not operating costs.
Why leave out the mortgage?
Cap rate compares properties as if bought with cash, so two buyers with different loans get the same number for the same property.
Cap rate or rental yield?
Net rental yield and cap rate both use income after costs. Cap rate is the usual term when comparing investment properties by their value.