{
  "id": "cap-rate",
  "version": "a719dac0c056",
  "status": "published",
  "name": "Cap Rate Calculator",
  "question": "What is the cap rate of this property?",
  "summary": "Computes a rental property’s net operating income and capitalization rate (NOI ÷ value), or the value that gives a target cap rate.",
  "category": "finance",
  "subcategory": "investing",
  "url": "https://www.acalculator.org/finance/cap-rate-calculator",
  "markdown": "https://www.acalculator.org/finance/cap-rate-calculator.md",
  "kind": "function",
  "method": "Cap rate = NOI ÷ property value, where NOI = (rent + other income) × 12 × (1 − vacancy) − operating expenses.",
  "assumptions": [
    "Rent and other income are per month; the vacancy rate applies to both.",
    "Operating expenses are per year, or per month times 12 when the expense period is monthly.",
    "Mortgage payments, income tax, depreciation, and capital improvements are not operating expenses."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "calculationMode": {
        "title": "What do you want to find?",
        "description": "Find the cap rate from the property value, or the property value from a target cap rate.",
        "type": "string",
        "enum": [
          "cap-rate",
          "property-value"
        ]
      },
      "propertyValue": {
        "title": "Property value",
        "description": "The price or market value of the property.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 1,
        "maximum": 100000000000
      },
      "desiredCapRate": {
        "title": "Target cap rate",
        "description": "The cap rate similar properties sell at, used to value this one.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0.01,
        "maximum": 100
      },
      "grossRentalIncome": {
        "title": "Rent per month",
        "description": "The gross rent the property earns each month when fully let.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000
      },
      "otherIncome": {
        "title": "Other income per month",
        "description": "Parking, laundry, storage, and other income each month.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000
      },
      "vacancyRate": {
        "title": "Vacancy rate",
        "description": "The share of the gross income lost to empty units and unpaid rent.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "expensePeriod": {
        "title": "Enter the expenses below",
        "description": "Whether the operating expenses below are typed per year or per month. Switching keeps the typed numbers and reads them in the new period.",
        "type": "string",
        "enum": [
          "annual",
          "monthly"
        ]
      },
      "propertyTaxes": {
        "title": "Property taxes",
        "description": "Property taxes, per year or per month as the expense period says.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000000
      },
      "propertyInsurance": {
        "title": "Insurance",
        "description": "Property insurance, per year or per month as the expense period says.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000000
      },
      "maintenanceRepairs": {
        "title": "Maintenance and repairs",
        "description": "Routine maintenance and repairs, per year or per month as the expense period says.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000000
      },
      "propertyManagement": {
        "title": "Property management",
        "description": "Property management fees, per year or per month as the expense period says.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000000
      },
      "otherExpenses": {
        "title": "Other expenses",
        "description": "Utilities, HOA fees, and other running costs, per year or per month as the expense period says.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000000
      }
    }
  },
  "outputs": {
    "capRate": {
      "label": "Cap rate",
      "description": "Net operating income ÷ property value, as a percent.",
      "format": "percent"
    },
    "propertyValue": {
      "label": "Property value",
      "description": "Net operating income ÷ the target cap rate.",
      "format": "money"
    },
    "noi": {
      "label": "Net operating income (NOI)",
      "description": "Effective gross income minus operating expenses, per year.",
      "format": "money"
    },
    "grossIncome": {
      "label": "Gross income per year",
      "description": "(Rent + other income) × 12.",
      "format": "money"
    },
    "vacancyLoss": {
      "label": "Vacancy loss per year",
      "description": "Gross income × the vacancy rate.",
      "format": "money"
    },
    "effectiveIncome": {
      "label": "Effective gross income",
      "description": "Gross income minus the vacancy loss, per year.",
      "format": "money"
    },
    "entered": {
      "label": "Operating expenses as entered",
      "description": "The operating expenses added up as typed, with the period chosen for them.",
      "format": "text"
    },
    "expenses": {
      "label": "Operating expenses per year",
      "description": "All operating expenses added up, per year.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "calculationMode": "cap-rate",
      "propertyValue": 350000,
      "desiredCapRate": 6.5,
      "grossRentalIncome": 2800,
      "otherIncome": 200,
      "vacancyRate": 5,
      "expensePeriod": "annual",
      "propertyTaxes": 4200,
      "propertyInsurance": 1800,
      "maintenanceRepairs": 2100,
      "propertyManagement": 1680,
      "otherExpenses": 1200
    },
    "outputs": {
      "capRate": 6.634285714285715,
      "noi": 23220,
      "grossIncome": 36000,
      "vacancyLoss": 1800,
      "effectiveIncome": 34200,
      "entered": "$10,980.00 a year",
      "expenses": 10980
    },
    "text": "A property worth $350,000.00 with $10,980.00 a year of operating expenses and $23,220.00 a year of net operating income has a cap rate of 6.63%."
  },
  "examples": [
    {
      "given": {
        "calculationMode": "cap-rate",
        "propertyValue": 350000,
        "grossRentalIncome": 2800,
        "otherIncome": 200,
        "vacancyRate": 5,
        "expensePeriod": "annual",
        "propertyTaxes": 4200,
        "propertyInsurance": 1800,
        "maintenanceRepairs": 2100,
        "propertyManagement": 1680,
        "otherExpenses": 1200
      },
      "expect": {
        "noi": 23220,
        "desiredCapRate": 6.634285714285715,
        "grossIncome": 36000,
        "vacancyLoss": 1800,
        "expenses": 10980
      },
      "source": "cap rate = NOI ÷ value (Appraisal Institute, The Appraisal of Real Estate, direct capitalization); hand calculation in content.mdx; Net operating income and operating expenses: Internal Revenue Service, Publication 527, Residential Rental Property (what counts as a rental expense). https://www.irs.gov/publications/p527"
    },
    {
      "given": {
        "calculationMode": "cap-rate",
        "propertyValue": 1000000,
        "grossRentalIncome": 10000,
        "otherIncome": 200,
        "vacancyRate": 10,
        "expensePeriod": "annual",
        "propertyTaxes": 12000,
        "propertyInsurance": 4000,
        "maintenanceRepairs": 6000,
        "propertyManagement": 12000,
        "otherExpenses": 3000
      },
      "expect": {
        "noi": 73160,
        "desiredCapRate": 7.316000000000001
      },
      "source": "hand calculation in content.mdx; Net operating income and operating expenses: Internal Revenue Service, Publication 527, Residential Rental Property (what counts as a rental expense). https://www.irs.gov/publications/p527"
    },
    {
      "given": {
        "calculationMode": "property-value",
        "desiredCapRate": 6.5,
        "grossRentalIncome": 2800,
        "otherIncome": 200,
        "vacancyRate": 5,
        "expensePeriod": "monthly",
        "propertyTaxes": 350,
        "propertyInsurance": 150,
        "maintenanceRepairs": 175,
        "propertyManagement": 140,
        "otherExpenses": 100
      },
      "expect": {
        "noi": 23220,
        "propertyValue": 357230.7692307692
      },
      "source": "value = NOI ÷ cap rate; hand calculation in content.mdx (monthly expenses × 12 = 10,980); Net operating income and operating expenses: Internal Revenue Service, Publication 527, Residential Rental Property (what counts as a rental expense). https://www.irs.gov/publications/p527"
    }
  ],
  "sources": [
    "Direct capitalization, value = NOI ÷ capitalization rate: Appraisal Institute, The Appraisal of Real Estate, 15th edition, chapter on the income capitalization approach.",
    "Net operating income and operating expenses: Internal Revenue Service, Publication 527, Residential Rental Property (what counts as a rental expense). https://www.irs.gov/publications/p527"
  ],
  "related": [
    "rent-vs-buy",
    "irr"
  ],
  "changelog": [
    {
      "date": "2026-09-29",
      "note": "Worked examples name a published reference for their rule."
    },
    {
      "date": "2026-10-01",
      "note": "The expense period is easier to see: the switch reads “Enter the expenses below”, each expense says “per year or per month, as chosen above”, and the answer names the expenses with their period. The maths did not change."
    }
  ]
}