Calculator Inputs
Calculator category: Physics
Formula Used
Potential Gross Income = Gross Rental Income + Other Income.
Effective Gross Income = Potential Gross Income - Vacancy Loss - Credit Loss.
Total Operating Expenses = Taxes + Insurance + Maintenance + Utilities + Payroll + HOA + Admin + Reserves + Other Expenses + Management Fee.
NOI = Effective Gross Income - Total Operating Expenses.
Cap Rate = NOI / Property Value × 100.
Value at Target Cap Rate = NOI / Target Cap Rate.
DSCR = NOI / Annual Debt Service.
Cash on Cash Return = Before Tax Cash Flow / Cash Invested × 100.
How to Use This Calculator
- Enter annual gross rent and other income.
- Add vacancy and credit loss rates.
- Enter all normal operating expenses.
- Add the property value and target cap rate.
- Add loan details to review debt coverage.
- Click calculate to view NOI, cap rate, value, DSCR, and cash flow.
- Use the CSV or PDF buttons to save the result.
Example Data Table
| Scenario |
NOI |
Value |
Cap Rate |
Annual Debt |
DSCR |
| Base Case |
$120,000 |
$2,000,000 |
6.00% |
$96,000 |
1.25x |
| Higher Vacancy |
$108,000 |
$2,000,000 |
5.40% |
$96,000 |
1.13x |
| Improved Rent |
$135,000 |
$2,000,000 |
6.75% |
$96,000 |
1.41x |
Understanding Cap Rate and NOI
Cap rate and NOI are core property measures. They help compare real estate deals quickly. NOI means net operating income. It measures income left after normal operating costs. Debt payments are not included. Income tax is not included. This keeps the result focused on the property itself.
Why NOI Matters
NOI starts with potential gross income. This includes rent and other property income. Vacancy loss and credit loss are then removed. The result is effective gross income. Operating costs are subtracted next. Common costs include taxes, insurance, repairs, utilities, management, and reserves. A stronger NOI usually supports a higher value.
How Cap Rate Helps
The cap rate compares NOI with property value. A higher cap rate may show a higher income yield. It can also signal more risk. A lower cap rate may show a safer market or stronger asset. Investors should compare similar property types and locations. Cap rate alone cannot judge every deal.
Using Debt Checks
Debt service is separate from NOI. Lenders often review DSCR. DSCR means debt service coverage ratio. It compares NOI with annual debt payments. A DSCR above one means NOI covers debt. A higher value gives more cushion. Cash flow shows what remains after debt service.
Practical Review
This calculator lets you adjust many assumptions. You can test rent changes, vacancy changes, expense levels, and financing. Use realistic figures. Do not ignore reserves. Small expense mistakes can change returns. Compare the calculated cap rate with local market sales. Compare cash on cash return with your own target. A deal may show a strong cap rate but weak cash flow. This can happen when debt is large. It can also happen when loan terms are expensive.
Best Use
Use this tool before deeper due diligence. Then confirm leases, bills, tax records, and repair needs. Ask a qualified adviser when a decision is material. The calculator is a planning aid. It is not a valuation report. Still, it gives a fast view of income strength, pricing, and risk. Clear inputs create better results. Keep notes for each scenario. Review them before making offers.
Update assumptions whenever rents, taxes, loan terms, or vacancy expectations change during review and negotiation periods too.
FAQs
What is NOI?
NOI means net operating income. It is income left after vacancy, credit loss, and normal operating expenses. It excludes loan payments, income tax, depreciation, and capital spending.
What is cap rate?
Cap rate is NOI divided by property value. It shows the annual income yield before debt. Investors use it to compare similar income properties.
Does this calculator include mortgage payments in NOI?
No. Mortgage payments are not operating expenses. The calculator keeps NOI separate, then uses debt service for DSCR and cash flow checks.
Why is vacancy loss included?
Vacancy loss adjusts income for empty units or downtime. It makes the result more realistic than using full rent without deductions.
What is a good cap rate?
A good cap rate depends on property type, location, lease quality, risk, and market conditions. Compare your result with recent similar sales.
What does DSCR show?
DSCR shows how well NOI covers annual debt payments. A value above 1.00x means NOI is greater than debt service.
Can I use this for commercial property?
Yes. You can use it for rental housing, retail, office, industrial, or mixed income property. Use annual figures for best results.
Why is cash on cash different from cap rate?
Cap rate uses property value and ignores debt. Cash on cash uses cash invested and cash flow after debt service.