Rental Cap Rate Calculator

Example Item	Sample Value
Units	2
Monthly Rent per Unit	$1,850
Other Monthly Income	$120
Vacancy Rate	6%
Management Rate	8%
Total Annual Operating Expenses	$11,400
Purchase Price	$310,000
Closing Costs + Rehab	$18,000
Estimated NOI	$27,221.28
Estimated Cap Rate on Purchase Price	8.78%

Formula Used

Gross Annual Rent
Monthly Rent per Unit × Units × 12

Gross Scheduled Income
Gross Annual Rent + Other Annual Income

Vacancy Loss
Gross Scheduled Income × Vacancy Rate

Effective Gross Income
Gross Scheduled Income − Vacancy Loss

Management Fee
Effective Gross Income × Management Rate

Net Operating Income (NOI)
Effective Gross Income − Operating Expenses

Cap Rate
(NOI ÷ Purchase Price) × 100

Total Investment Cap Rate
(NOI ÷ Total Investment) × 100

Cap rate is an unlevered return measure. It usually excludes mortgage payments, principal, income taxes, and depreciation.

How to Use This Calculator

Enter the number of rental units.
Add the monthly rent for each unit.
Include extra monthly income such as parking or storage.
Choose a realistic vacancy percentage for your market.
Enter the management percentage and annual operating costs.
Add purchase price, closing costs, and rehab budget.
Click the calculate button to show results above the form.
Review NOI, both cap rates, expense ratio, and the Plotly graph.
Download the report as CSV or PDF if needed.

FAQs

1) What does cap rate measure?

Cap rate measures annual net operating income relative to the property price or total investment. It helps compare rental properties quickly without considering financing structure.

2) Why does this calculator show two cap rates?

One uses purchase price only. The second uses total investment, which includes closing costs and rehab. The total investment version can give a more realistic screening number.

3) Is a higher cap rate always better?

No. Higher cap rates can reflect stronger returns, but they can also signal higher risk, weaker locations, older buildings, or more demanding management requirements.

4) Should mortgage payments be included?

Cap rate usually excludes financing. Mortgage payments affect cash flow, not NOI. Use cap rate for asset comparison, then review debt service separately.

5) What expenses belong in operating expenses?

Typical operating expenses include taxes, insurance, maintenance, management, HOA fees, utilities, leasing costs, and recurring miscellaneous property expenses.

6) How should I choose the vacancy rate?

Use a market-based estimate from local history, comparable properties, or your own building records. Conservative vacancy assumptions usually produce better underwriting decisions.

7) Can I use this for multi-unit rentals?

Yes. Enter the unit count and the monthly rent per unit. The calculator annualizes rent and combines income, expenses, and investment into one result set.

8) What is a good next step after checking cap rate?

Review rent growth, repair risk, neighborhood demand, financing terms, reserves, and exit assumptions. A strong purchase decision needs more than one metric.