Cap rate calculator
Cap rate is the cleanest way to compare two rentals on equal footing: net operating income divided by price, no financing noise. This free calculator computes it with real per-state property tax and insurance, so the number is honest in high-tax states too. No signup.
Fixed assumptions: 8% vacancy, 10% maintenance, 10% management. Property tax + insurance are per-state estimates, not a county assessment or insurance quote.
- Mortgage (P&I)$1,958/mo
- Operating expenses$1,447/mo
- Cash invested (down payment)$70,000
- Gross rent multiplier13.3
Estimates only. Verify rent comps, taxes and condition before making an offer. This is not financial advice or an appraisal.
Screening a lot of listings?
The Mortar Chrome extension runs this exact analysis automatically on any Zillow listing. No typing. Free to start.
How the cap rate formula works
Cap rate = (annual rent minus annual operating expenses) divided by purchase price. Operating expenses here are property tax, insurance, an 8% vacancy reserve, a 10% maintenance reserve and 10% management. The mortgage is excluded on purpose: cap rate measures the asset, not your loan.
The trap in most quick calculators is the tax line. A national-average assumption of about 1.2% makes a Houston or Newark deal look meaningfully better than it is, because Texas and New Jersey property taxes run far higher. The state selector above applies the real rate, which is often the difference between a deal that screens as a buy and one that quietly loses money.
Frequently asked questions
How is cap rate calculated?
Cap rate is annual net operating income divided by the purchase price. Net operating income is rent minus operating expenses (property tax, insurance, vacancy, maintenance, management) before any mortgage payment. This calculator computes it deterministically from your inputs, using real per-state tax and insurance rates.
What is a good cap rate for a rental property?
It depends on the market and the asset. Many buy-and-hold investors screen for a cap rate above 7%, and that is the threshold this tool uses in its verdict, but a 5% cap can be strong in an expensive coastal metro while an 8% cap can be weak in a declining one. Compare against what similar properties trade at locally.
Does cap rate include the mortgage?
No. Cap rate deliberately ignores financing so two buyers with different loans see the same number on the same property. If you want the return on the cash you personally put in, use the cash-on-cash return calculator instead.
Why does the state selection matter?
Property tax and insurance are operating expenses, so they directly reduce net operating income and the cap rate. A flat national tax assumption overstates the cap rate in high-tax states like Texas, Illinois and New Jersey. This calculator uses real per-state rates so the number holds up where you actually buy.
Is this financial advice?
No. Every figure is an estimate to help you screen deals quickly. It is not financial, investment or real estate advice, and it is not an appraisal. Verify rent comps, taxes and condition before making an offer.
More free calculators
The full screen: cap rate, cash flow, cash-on-cash and a verdict, with real per-state taxes and insurance.
What the cash you actually put in earns, with your own down payment, rate and term.
Monthly rent minus mortgage and every honest expense line, including reserves.
Work backwards: the highest price at which a deal still clears your cash flow and return targets.
Prefer the full write-up? Read the Mortar blog on analyzing rentals.