Net operating income vs property price. The Cap Rate Calculator takes property price, gross monthly rent, monthly operating expenses (excluding mortgage) and returns cap rate plus net operating income per year, gross yield. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Property returns depend on assumptions about rent, occupancy, costs and appreciation that are easy to make optimistic. Enter conservative figures and remember that transaction costs, taxes and vacancy periods are real. Use the worked example below to check the maths against your own figures.
How the Cap Rate Calculator works
The capitalisation rate is the unlevered return a property earns from its operations. Higher cap rates mean cheaper prices or riskier assets; 4–6% is typical for prime residential, 7–10% for secondary commercial.
Worked example
With the example values (property price of $500,000, gross monthly rent of $4,500, monthly operating expenses (excluding mortgage) of $1,000), the cap rate is 8.40%; net operating income per year $42,000.00, gross yield 10.80%. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is cap rate calculated?
cap rate = net operating income ÷ property price.
Which figures do I need?
Property price, gross monthly rent, monthly operating expenses (excluding mortgage). Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
Which costs are easy to forget?
Vacancy periods, maintenance, property tax, insurance, brokerage on purchase and sale, and stamp duty. Include them for a realistic return.
