Cap Rate & Cash Flow Calculator
Analyze any rental property in seconds. Get cap rate, net operating income, monthly cash flow, cash-on-cash return, and gross rent multiplier.
Taxes, insurance, maintenance & management
How to Analyze a Rental Property with Cap Rate
The capitalization rate measures a property's unleveraged annual return: divide Net Operating Income (NOI) by the purchase price. NOI is your effective gross income (rent minus vacancy) less operating expenses like taxes, insurance, maintenance, and management — but excluding mortgage payments. Cap rate lets you compare deals apples-to-apples regardless of financing.
Cash-on-cash return factors in your loan, measuring annual pre-tax cash flow against the actual cash you put in (down payment plus closing costs). The gross rent multiplier (GRM) — price divided by annual rent — is a quick screening ratio: a lower GRM generally signals a better value. Use all three together to separate strong investments from money pits before you make an offer.
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Frequently Asked Questions
What is a good cap rate?
A good cap rate typically falls between 5% and 10%, but it varies widely by market and risk. Lower cap rates (4–6%) are common in high-demand, low-risk metros, while higher cap rates (8–12%) appear in markets with more risk or slower appreciation. Compare a property's cap rate to similar properties in the same area rather than to a universal benchmark.
How is cap rate calculated?
Cap rate equals Net Operating Income (NOI) divided by the purchase price, expressed as a percentage. NOI is your effective gross rental income (gross rent minus vacancy) minus operating expenses such as taxes, insurance, maintenance, and management — but it excludes mortgage payments, so cap rate measures the unleveraged return.
What is cash-on-cash return?
Cash-on-cash return measures your annual pre-tax cash flow against the actual cash you invested — typically the down payment plus closing costs. Unlike cap rate, it accounts for financing, so leverage from a mortgage can raise (or lower) it. It tells you how hard your invested dollars are working each year.