Cap Rate & DSCR Calculator
Input your purchase price and rent roll. Get instant Cap Rate, NOI, and Debt Service Coverage.
Cap rate of 4%–6% represents a stable secondary market asset. DSCR is below 1.20x; private and non-QM lenders typically require 1.25x+. Cash flow is negative after debt service.
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Every rental deal has a cap rate. Most investors calculate it wrong.
Capitalization Rate (Cap Rate) is your annual Net Operating Income divided by the total acquisition cost. It reveals your unleveraged return on capital before financing. When paired with the Debt Service Coverage Ratio (DSCR), you immediately see whether a property cash-flows safely above lender thresholds.
Calculation Methodology & Steps
- 1Net Operating Income (NOI) = Gross Annual Rent minus Vacancy, Property Taxes, Insurance, Maintenance, and Property Management.
- 2Cap Rate = NOI ÷ Purchase Price × 100
- 3Cash-on-Cash Return = Net Annual Cash Flow (after debt) ÷ Cash Invested × 100
- 4DSCR Ratio = NOI ÷ Annual Debt Service (P&I)
Market Benchmarks
A 6% to 8% cap rate represents a healthy secondary market return. A DSCR of 1.25x or higher is standard for prime private credit financing.