Please enter valid positive numbers in all fields.
Capitalization Rate (Cap Rate)
0.00%
Net Operating Income (NOI) – Annual
$0.00
Gross Rental Yield
0.00%
function calculateCapRate() {
// Get input values
var price = document.getElementById('propertyPrice').value;
var rent = document.getElementById('monthlyRent').value;
var taxes = document.getElementById('annualTaxes').value;
var insurance = document.getElementById('annualInsurance').value;
var maintenance = document.getElementById('annualMaintenance').value;
var errorMsg = document.getElementById('error-message');
var resultsArea = document.getElementById('results-area');
// Convert to floats
var priceVal = parseFloat(price);
var rentVal = parseFloat(rent);
var taxesVal = parseFloat(taxes);
var insuranceVal = parseFloat(insurance);
var maintenanceVal = parseFloat(maintenance);
// Validation
if (isNaN(priceVal) || isNaN(rentVal) || isNaN(taxesVal) || isNaN(insuranceVal) || isNaN(maintenanceVal) || priceVal <= 0) {
errorMsg.style.display = 'block';
resultsArea.style.display = 'none';
return;
}
errorMsg.style.display = 'none';
// Specific Calculations
// 1. Annual Gross Income
var annualIncome = rentVal * 12;
// 2. Total Annual Operating Expenses
var totalExpenses = taxesVal + insuranceVal + maintenanceVal;
// 3. Net Operating Income (NOI)
var noi = annualIncome – totalExpenses;
// 4. Cap Rate = (NOI / Property Value) * 100
var capRate = (noi / priceVal) * 100;
// 5. Gross Yield = (Annual Income / Property Value) * 100
var grossYield = (annualIncome / priceVal) * 100;
// Formatting results
document.getElementById('displayCapRate').innerHTML = capRate.toFixed(2) + "%";
document.getElementById('displayNOI').innerHTML = "$" + noi.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayYield').innerHTML = grossYield.toFixed(2) + "%";
// Show results
resultsArea.style.display = 'block';
}
Understanding the Rental Property Cap Rate Calculator
Investing in real estate requires more than just a gut feeling; it requires concrete data to determine if a property will generate a return on investment (ROI). The Rental Property Cap Rate Calculator is an essential tool for investors to evaluate the profitability of a potential purchase by analyzing its Capitalization Rate (Cap Rate) and Net Operating Income (NOI).
What is Cap Rate?
The Capitalization Rate, or Cap Rate, is a fundamental metric used in the world of commercial and residential real estate. It indicates the rate of return that is expected to be generated on a real estate investment property. Unlike ROI, the Cap Rate calculation assumes that the property is purchased in cash, without any loan or mortgage. This allows investors to compare the intrinsic value and profitability of different properties regardless of financing methods.
Cap Rate Formula: Cap Rate = (Net Operating Income / Current Market Value) × 100
Key Components of the Calculation
Property Purchase Price: The total cost to acquire the asset.
Gross Rental Income: The total income the property generates from tenants before any expenses are deducted. In our calculator, we take your monthly rent and annualize it.
Operating Expenses: These are the costs required to run and maintain the property. This includes property taxes, insurance, maintenance, repairs, and HOA fees. Note that mortgage payments (principal and interest) are not included in Cap Rate calculations.
Net Operating Income (NOI): This is the profit a property generates after all necessary operating expenses are paid, but before taxes and debt service.
How to Interpret Your Results
Once you have entered your numbers into the calculator above, you will receive three key metrics:
1. Net Operating Income (NOI)
A positive NOI means the property is generating enough income to cover its operating costs. The higher the NOI, the more cash flow is available to pay down debt or provide profit to the owner.
2. Cap Rate Percentage
There is no single "good" Cap Rate, as it varies by location and asset class. However, generally speaking:
4% – 5%: Often found in high-demand, low-risk areas (Class A properties). These are considered safer but yield lower returns.
6% – 8%: A balanced range for many residential investors, offering a mix of stability and cash flow.
8% – 10%+: Often found in riskier neighborhoods or properties requiring significant work, but they offer the potential for high cash flow.
3. Gross Rental Yield
This is a quick "back-of-the-napkin" calculation that divides annual rent by the property price. While useful for a quick screening, it is less accurate than the Cap Rate because it ignores expenses.
Example Scenario
Imagine you are looking at a single-family home listed for $200,000.
You believe you can rent it for $1,500 per month ($18,000 annually).
Your annual expenses (taxes, insurance, repairs) total $5,000.
Using the logic in our calculator:
NOI: $18,000 (Rent) – $5,000 (Expenses) = $13,000
Cap Rate: ($13,000 / $200,000) = 6.5%
This 6.5% return helps you compare this house against other investment opportunities, such as stocks or bonds, to decide where your capital will work hardest.