Calculator Inputs
Example Data Table
| Scenario | Units | Monthly Rent / Unit | Other Monthly Income | Vacancy | Property Value | NOI | Cap Rate |
|---|---|---|---|---|---|---|---|
| Sample Fourplex | 4 | $1,200.00 | $200.00 | 6.00% | $525,000.00 | $39,438.00 | 7.51% |
| Conservative Estimate | 4 | $1,100.00 | $150.00 | 8.00% | $525,000.00 | $32,234.00 | 6.14% |
| Optimized Operations | 4 | $1,250.00 | $250.00 | 4.50% | $525,000.00 | $44,710.00 | 8.52% |
Formula Used
Potential Gross Income (PGI) = Annual Gross Rent + Annual Other Income
Vacancy Loss = PGI × Vacancy Rate
Effective Gross Income (EGI) = PGI − Vacancy Loss
Management Fee = EGI × Management Rate
Total Operating Expenses = Taxes + Insurance + HOA + Utilities + Maintenance + Management + Repairs Reserve + Advertising + Legal + Other Expenses
Net Operating Income (NOI) = EGI − Total Operating Expenses
Cap Rate on Market Value = NOI ÷ Current Property Value × 100
Cap Rate on Cost Basis = NOI ÷ (Purchase Price + Closing Costs + Rehab Costs) × 100
Pre-Tax Cash Flow = NOI − Annual Debt Service
Cash on Cash Return = Pre-Tax Cash Flow ÷ Cash Invested × 100
How to Use This Calculator
- Enter unit count, monthly rent, and any other recurring monthly income.
- Add a realistic vacancy rate based on your market and tenant turnover history.
- Enter the current property value for market-value cap rate analysis.
- Add purchase price, closing costs, and rehab budget for cost-basis comparison.
- Fill in annual operating expenses carefully. Exclude mortgage principal and interest from cap rate inputs.
- Add debt service and cash invested only if you want financing metrics.
- Press Calculate Cap Rate to show results above the form.
- Use the CSV and PDF buttons to export the final output.
Frequently Asked Questions
1) What does cap rate measure?
Cap rate measures net operating income relative to property value. It helps compare rental properties quickly, without financing distorting the core operating performance of the asset.
2) Should mortgage payments be included in cap rate?
No. Cap rate is based on NOI before debt service. Mortgage payments belong in cash flow, cash-on-cash return, and debt coverage analysis, not the cap rate itself.
3) Which expenses belong in operating expenses?
Include recurring property costs such as taxes, insurance, HOA fees, utilities, maintenance, management, leasing, legal, and reserves. Exclude loan payments, depreciation, and income taxes.
4) Should I use market value or purchase cost?
Use market value to compare current investment performance across listings. Use cost basis to judge how efficiently your original acquisition and renovation budget is performing.
5) Is a higher cap rate always better?
Not always. Higher cap rates can signal stronger income, but they may also reflect more vacancy risk, weaker locations, deferred maintenance, or harder financing conditions.
6) Why does vacancy matter so much?
Vacancy directly reduces effective gross income. Even a small increase can lower NOI materially, which then pushes cap rate, cash flow, and debt coverage lower.
7) Why show cash-on-cash return too?
Cap rate ignores financing. Cash-on-cash return adds leverage and actual cash invested, making it useful when comparing personal return expectations across financed deals.
8) Can I use this for mixed-income properties?
Yes. Add recurring ancillary income such as parking, laundry, storage, or fees into the other income field, then include all related annual operating expenses accurately.