Rental Property Cap Rate Calculator
.calculator-widget-container {
font-family: 'Segoe UI', Tahoma, Geneva, Verdana, sans-serif;
max-width: 800px;
margin: 40px auto;
padding: 30px;
background-color: #f9fbfd;
border: 1px solid #e1e4e8;
border-radius: 8px;
box-shadow: 0 4px 12px rgba(0,0,0,0.05);
}
.calc-header {
text-align: center;
margin-bottom: 25px;
color: #2c3e50;
}
.calc-row {
display: flex;
flex-wrap: wrap;
gap: 20px;
margin-bottom: 15px;
}
.calc-input-group {
flex: 1;
min-width: 250px;
display: flex;
flex-direction: column;
}
.calc-input-group label {
font-weight: 600;
margin-bottom: 8px;
color: #4a5568;
font-size: 14px;
}
.calc-input-group input {
padding: 12px;
border: 1px solid #cbd5e0;
border-radius: 6px;
font-size: 16px;
transition: border-color 0.2s;
}
.calc-input-group input:focus {
border-color: #3182ce;
outline: none;
}
.calc-btn {
width: 100%;
padding: 15px;
background-color: #2b6cb0;
color: white;
border: none;
border-radius: 6px;
font-size: 18px;
font-weight: bold;
cursor: pointer;
transition: background-color 0.2s;
margin-top: 10px;
}
.calc-btn:hover {
background-color: #2c5282;
}
.result-box {
margin-top: 25px;
padding: 20px;
background-color: #ffffff;
border-left: 5px solid #48bb78;
border-radius: 4px;
box-shadow: 0 2px 5px rgba(0,0,0,0.05);
display: none;
}
.result-value {
font-size: 32px;
color: #2f855a;
font-weight: 800;
margin: 10px 0;
}
.result-label {
font-size: 14px;
text-transform: uppercase;
letter-spacing: 1px;
color: #718096;
}
.result-details {
margin-top: 15px;
padding-top: 15px;
border-top: 1px solid #edf2f7;
font-size: 15px;
color: #4a5568;
}
.result-row {
display: flex;
justify-content: space-between;
margin-bottom: 8px;
}
/* Article Styles */
.seo-article {
max-width: 800px;
margin: 50px auto;
line-height: 1.6;
color: #333;
font-family: 'Georgia', serif;
}
.seo-article h2 {
color: #2c3e50;
margin-top: 30px;
font-family: 'Segoe UI', sans-serif;
}
.seo-article h3 {
color: #2b6cb0;
font-family: 'Segoe UI', sans-serif;
}
.seo-article ul {
background: #f0f4f8;
padding: 20px 40px;
border-radius: 8px;
}
.seo-article li {
margin-bottom: 10px;
}
Understanding Capitalization Rate (Cap Rate)
For real estate investors, the Capitalization Rate (Cap Rate) is one of the most fundamental metrics used to evaluate the profitability of an investment property. Unlike simpler metrics that might only look at cash flow, the Cap Rate helps you compare the return on investment (ROI) across different properties regardless of how they are financed.
What is the Cap Rate Formula?
The Cap Rate is calculated by dividing the property's Net Operating Income (NOI) by its current market value or purchase price. The specific formula used in our calculator is:
- Cap Rate = (Net Operating Income / Property Value) × 100%
To derive the Net Operating Income, you must subtract all operating expenses (taxes, insurance, maintenance, property management) from the gross rental income. Note that mortgage payments are not included in the NOI calculation.
What is a Good Cap Rate?
There is no single "good" Cap Rate, as it varies heavily by location and property type. However, general market guidelines suggest:
- 4% – 5%: Common in high-demand "Class A" areas (e.g., downtown NYC or SF). These are lower risk but offer lower returns.
- 6% – 8%: Often considered a healthy balance of risk and return for residential rentals in stable suburban markets.
- 8% – 12%+: Typical for higher-risk properties or rural areas where appreciation is less likely, requiring higher cash flow to justify the investment.
Why Use This Calculator?
Using a manual spreadsheet can lead to errors, particularly when factoring in vacancy rates. This tool automatically adjusts your Gross Annual Income based on the vacancy percentage you provide (default is 5%), ensuring you don't overestimate your potential earnings. Whether you are flipping houses or building a long-term rental portfolio, knowing your Cap Rate is the first step in smart negotiation.
function calculateCapRate() {
// Retrieve values from inputs
var price = parseFloat(document.getElementById("propertyPrice").value);
var monthlyRent = parseFloat(document.getElementById("monthlyRent").value);
var annualExpenses = parseFloat(document.getElementById("annualExpenses").value);
var vacancyRate = parseFloat(document.getElementById("vacancyRate").value);
// Validation: Check if inputs are numbers and positive
if (isNaN(price) || isNaN(monthlyRent) || isNaN(annualExpenses) || isNaN(vacancyRate)) {
alert("Please enter valid numbers in all fields.");
return;
}
if (price <= 0) {
alert("Property Price must be greater than zero.");
return;
}
// 1. Calculate Gross Annual Income
var grossAnnualIncome = monthlyRent * 12;
// 2. Calculate Vacancy Loss
var vacancyLoss = grossAnnualIncome * (vacancyRate / 100);
// 3. Calculate Effective Gross Income
var effectiveGrossIncome = grossAnnualIncome – vacancyLoss;
// 4. Calculate Net Operating Income (NOI)
var noi = effectiveGrossIncome – annualExpenses;
// 5. Calculate Cap Rate
var capRate = (noi / price) * 100;
// Display Logic
var resultBox = document.getElementById("resultBox");
var finalCapRate = document.getElementById("finalCapRate");
var grossIncomeDisplay = document.getElementById("grossIncomeDisplay");
var effectiveIncomeDisplay = document.getElementById("effectiveIncomeDisplay");
var noiDisplay = document.getElementById("noiDisplay");
// Format Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
// Update HTML content
grossIncomeDisplay.innerHTML = formatter.format(grossAnnualIncome);
effectiveIncomeDisplay.innerHTML = formatter.format(effectiveGrossIncome);
noiDisplay.innerHTML = formatter.format(noi);
// Handle negative Cap Rate or standard display
if (capRate < 0) {
finalCapRate.innerHTML = capRate.toFixed(2) + "% (Loss)";
finalCapRate.style.color = "#e53e3e";
} else {
finalCapRate.innerHTML = capRate.toFixed(2) + "%";
finalCapRate.style.color = "#2f855a";
}
// Show the result box
resultBox.style.display = "block";
}