Cap Rate Calculator

Last reviewed April 2026

Cap Rate is the metric to reach for first when comparing two rental deals. It strips out financing entirely and tells you what the property is actually earning on its own. If you know the Net Operating Income and the purchase price, you have your cap rate. The LandlordCalc cap rate calculator does the math for you, but it also goes a step further: it pulls live mortgage rate data from the Federal Reserve so you can see how today's financing environment changes whether that cap rate is actually a good deal.

What Cap Rate Actually Tells You

Cap Rate is Net Operating Income divided by purchase price. NOI is your gross rental income minus all operating expenses (taxes, insurance, vacancy reserve, repairs, CapEx reserve, property management, utilities, HOA), but excluding mortgage payments. That last part matters. Cap Rate intentionally ignores how you finance the property, which is what makes it the cleanest apples-to-apples comparison metric.

Here's a quick example. Say you're looking at a $200,000 single-family rental that brings in $1,800 a month in rent. Annual gross income is $21,600. After taxes ($2,400), insurance ($1,200), a 5% vacancy reserve ($1,080), 8% repairs ($1,728), 5% CapEx ($1,080), and 8% property management ($1,728), your operating expenses total $9,216. NOI is $21,600 minus $9,216, or $12,384. Cap rate is $12,384 divided by $200,000, which equals 6.19%.

What's a Good Cap Rate Today?

This is where things get interesting, and where most online calculators fall short. The "good" cap rate range is not a constant. It moves with interest rates. When the 10-year Treasury was at 1.5%, a 5% cap rate looked great. When mortgages are running at 6.37%, that same 5% cap rate is a money-loser if you're using leverage. As a rule of thumb in today's market, I want to see a cap rate that's at least 200 basis points above the 30-year mortgage rate before I'll get excited about a leveraged deal. That puts the floor right now at roughly 8.4% on a single-family rental.

Cap Rate vs Cash on Cash: Which One Matters More?

If you're paying cash, cap rate is your return. If you're financing, Cash on Cash Return is your actual yield on the money you put in, and it's the number that matters most to your bank account. I look at both, but for a leveraged deal I weight Cash on Cash more heavily. For a full breakdown of the difference, see Cash on Cash vs Cap Rate.

How LandlordCalc Calculates Cap Rate

The LandlordCalc cap rate calculator does all of this in real time. You enter purchase price, monthly rent, annual property tax, insurance, and the percentages you want to use for vacancy, repairs, CapEx, and property management. The calculator computes NOI, divides by purchase price, and shows you cap rate alongside seven other return metrics so you can see the full picture instead of one isolated number. Live FRED rate data also drives the AI investment commentary that sits below the results, so the benchmarks you see are based on today's environment, not yesterday's.

Frequently Asked Questions

What is a good cap rate for a rental property?

There's no universal answer, but in the current interest rate environment I look for a cap rate at least 200 basis points above the prevailing 30-year mortgage rate. With mortgages around 6.37%, that puts the floor near 8.4% on a single-family rental for me to consider it a strong leveraged deal.

Does cap rate include the mortgage payment?

No. Cap rate intentionally excludes mortgage payments. That's what makes it useful for comparing two properties side by side regardless of how they're financed. Once you layer in financing, you're looking at Cash on Cash Return instead.

How do I calculate NOI for cap rate?

NOI is annual gross rental income minus all operating expenses except mortgage. Operating expenses typically include property tax, insurance, vacancy reserve, repairs, CapEx reserve, property management, utilities you cover, and HOA fees.

Is a higher cap rate always better?

Not necessarily. A higher cap rate often means higher risk: tougher neighborhood, older property, more deferred maintenance, or weaker tenant base. A 12% cap rate in a Class C neighborhood may be worse on a risk-adjusted basis than a 7% cap rate in a Class A area where the property appreciates and the tenants pay on time.

What's the difference between cap rate and yield?

In the rental property world, cap rate and unlevered yield are essentially the same thing. Cap rate is the unlevered annual return on your purchase price. Levered yield, which is Cash on Cash Return, factors in your mortgage and gives you a different number.