Cap Rate Calculator
Type in the numbers. Get the cap rate. Decide if it pencils.
Every rental has a cap rate. Most investors calculate it wrong.
Cap rate 4-6%, normal for secondary metro markets. DSCR below 1.2, most lenders won't finance below this. Negative cash flow, deal only works if you expect appreciation.
Cap rate, capitalization rate, is the annual net operating income divided by the property purchase price. It answers one question: if you bought this property in cash, what percentage return would it produce annually before financing? A 6% cap rate means the property produces $6,000 of annual NOI for every $100,000 of purchase price. It's the industry-standard first-pass metric for whether a rental deal pencils.
- 01**Net Operating Income (NOI)** = annual rent minus vacancy, taxes, insurance, maintenance, and property management. NOT mortgage payment.
- 02**Cap Rate** = NOI / Purchase Price × 100
- 03**Cash-on-Cash Return** = Annual Cash Flow (after mortgage) / Cash Invested × 100
- 04**Gross Rent Multiplier (GRM)** = Purchase Price / Annual Rent
Cap rate ranges (2026 US averages): under 4% is Class A / prime coastal, 5-7% is normal secondary markets, 8-10%+ is tertiary markets or heavier-lift rentals. A 6.5% cap rate is roughly the national average.
Rental Property Landlord Toolkit
Tenant directory, rent collection log, unit turnover checklist, and a maintenance request tracker per address.
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