Please enter valid positive numbers for all fields.
Gross Annual Income:
Vacancy Loss:
Effective Gross Income:
Operating Expenses:
Net Operating Income (NOI):
Capitalization Rate (Cap Rate):
function calculateCapRate() {
// 1. Get input values by ID
var priceInput = document.getElementById("propertyPrice");
var rentInput = document.getElementById("monthlyRent");
var vacancyInput = document.getElementById("vacancyRate");
var expensesInput = document.getElementById("annualOpEx");
var errorDiv = document.getElementById("crcError");
var resultsDiv = document.getElementById("crcResults");
// 2. Parse values
var propertyPrice = parseFloat(priceInput.value);
var monthlyRent = parseFloat(rentInput.value);
var vacancyRate = parseFloat(vacancyInput.value);
var annualOpEx = parseFloat(expensesInput.value);
// 3. Validation
if (isNaN(propertyPrice) || isNaN(monthlyRent) || isNaN(vacancyRate) || isNaN(annualOpEx) || propertyPrice <= 0) {
errorDiv.style.display = "block";
resultsDiv.style.display = "none";
return;
}
errorDiv.style.display = "none";
// 4. Calculations
var grossAnnualIncome = monthlyRent * 12;
var vacancyLoss = grossAnnualIncome * (vacancyRate / 100);
var effectiveGrossIncome = grossAnnualIncome – vacancyLoss;
var netOperatingIncome = effectiveGrossIncome – annualOpEx;
// Calculate Cap Rate formula: (NOI / Current Market Value) * 100
var capRate = (netOperatingIncome / propertyPrice) * 100;
// 5. Formatting Helper
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
// 6. Update DOM
document.getElementById("displayGrossAnnual").innerHTML = formatter.format(grossAnnualIncome);
document.getElementById("displayVacancyLoss").innerHTML = "-" + formatter.format(vacancyLoss);
document.getElementById("displayEffectiveIncome").innerHTML = formatter.format(effectiveGrossIncome);
document.getElementById("displayExpenses").innerHTML = "-" + formatter.format(annualOpEx);
document.getElementById("displayNOI").innerHTML = formatter.format(netOperatingIncome);
document.getElementById("displayCapRate").innerHTML = capRate.toFixed(2) + "%";
// 7. Show Results
resultsDiv.style.display = "block";
}
What is a Cap Rate Calculator?
A Capitalization Rate (Cap Rate) Calculator is an essential tool for real estate investors used to evaluate the profitability and return potential of an investment property. Unlike a mortgage calculator, which focuses on debt, the Cap Rate focuses purely on the property's ability to generate revenue relative to its purchase price, assuming an all-cash purchase.
Using our calculator above helps you quickly filter through potential deals to find properties that meet your specific investment criteria before digging deeper into due diligence.
How to Calculate Cap Rate
The formula for Capitalization Rate is relatively simple but requires accurate inputs to be effective. The mathematical formula is:
Cap Rate = (Net Operating Income / Property Value) × 100
Step-by-Step Calculation:
Determine Gross Annual Income: Multiply the monthly rent by 12.
Subtract Vacancy: Realistically, a property won't be occupied 365 days a year. Deduct a percentage (usually 5-10%) for vacancy losses.
Subtract Operating Expenses: Deduct costs such as property taxes, insurance, property management fees, HOA dues, and maintenance reserves. Note: Do not include mortgage payments (principal and interest) in this calculation.
Calculate NOI: The result is your Net Operating Income (NOI).
Divide by Price: Divide the NOI by the current market value or purchase price of the property.
Real-Life Example
Imagine you are looking at a duplex listed for $400,000.
Rental Income: The two units generate $3,500 per month total ($42,000/year).
Vacancy (5%): You estimate $2,100 in lost rent due to turnover.
Operating Expenses: Taxes, insurance, and maintenance cost $12,000 per year.
Net Operating Income (NOI): $42,000 – $2,100 – $12,000 = $27,900.
Cap Rate: ($27,900 / $400,000) = 0.0697 or 6.97%.
This means if you bought the property with cash, your annual return on investment would be approximately 6.97%.
What is a "Good" Cap Rate?
There is no single answer for what constitutes a "good" cap rate, as it depends heavily on the location and asset class.
High Demand Areas (Low Cap Rates): In prime locations like NYC or San Francisco, cap rates might be 3% to 4%. These properties are considered safer and often appreciate more in value.
Secondary Markets (Mid Cap Rates): In growing suburbs or mid-sized cities, a cap rate of 5% to 8% is often considered a solid target for residential rentals.
High Risk Areas (High Cap Rates): In declining neighborhoods or rural areas, you might find cap rates of 10% or higher, reflecting the higher risk and potential difficulty in finding tenants.
Why Does Cap Rate Exclude Mortgage Payments?
The Capitalization Rate is designed to measure the performance of the property itself, not the financing used to buy it. By excluding mortgage debt service, investors can compare the inherent value of two different buildings regardless of whether one buyer pays cash and another puts 20% down. To calculate returns including your loan, you should use a Cash-on-Cash Return Calculator instead.