Cap Rate Calculator
Enter one deal and see cap rate and cash-on-cash return side by side, so you can tell instantly whether your mortgage is helping the return or quietly eating it. No sign-up, no email.
NOI ÷ price
cash flow ÷ cash in
One deal is easy. A portfolio needs a model.
This tool gives you year one. The Rental Property Analyzer gives you the whole hold period, in Excel and Google Sheets you own.
- 30-year projection: cash flow, equity, loan balance
- Hold-period IRR + sale proceeds model
- Cap rate, cash-on-cash, DSCR, GRM, OER, 1% rule
- Same engine, cross-checked to the cent
Cap rate vs cash-on-cash return, on your own numbers
Most explanations of these two metrics stop at the definitions. The useful part is what happens when you run one deal through both, which is what the calculator above does.
Cap rate
Net operating income divided by the property price. It answers one question: what does this building yield if nobody borrowed anything?
- Ignores your loan completely
- Comparable across properties and buyers
- Used to price a building and read a market
Cash-on-cash return
Annual cash flow after the mortgage, divided by the cash you actually put in. It answers a different question: what does this deal pay me?
- Changes with every loan term you negotiate
- Personal to your down payment and rate
- Used to decide whether to buy this deal
The number that decides which one is bigger
Whether leverage lifts your return or drags it comes down to a single comparison: your cap rate against your debt constant, the annual debt service divided by the loan balance. Borrow below your cap rate and leverage multiplies the return. Borrow above it and every extra dollar of loan pulls cash-on-cash further below cap rate, even while the deal still cash-flows.
What is a good cap rate?
There is no universal answer, and anyone who gives you one is selling something. Cap rates move with asset class, location, and the interest-rate environment. These are the rough bands investors use to orient, not advice.
| Cap rate | How investors typically read it |
|---|---|
| Under 4% | Prime location or heavy appreciation bet, thin current yield |
| 4% – 6% | Stabilized property in a strong, low-risk market |
| 6% – 8% | Common range for solid long-term rentals |
| 8% – 10%+ | Higher yield, usually paid for with more risk or more work |
A cap rate is only as honest as the NOI behind it. A listing that quietly leaves out management, maintenance, capital reserves, and vacancy will show a cap rate one to two points higher than the same building analyzed properly. The calculator above includes all four by default for that reason.
Questions investors ask
What is the difference between cap rate and cash-on-cash return?
Cap rate is unlevered: net operating income divided by the property price, the yield as if you paid all cash. Cash-on-cash is levered: annual cash flow after the mortgage, divided by the cash you actually invested. Two buyers of the identical building have the same cap rate and completely different cash-on-cash returns, because they have different loans.
Can cash-on-cash be lower than cap rate?
Yes, and at higher interest rates it often is. If your debt constant, the annual debt service divided by the loan, is above your cap rate, then borrowing costs more than the building yields and leverage drags your return down. The deal can still cash-flow while cash-on-cash sits below cap rate. The calculator shows both numbers and names which way leverage is pushing.
Does the mortgage belong in the cap rate calculation?
No. Debt service is a financing cost, not an operating expense, so it never enters net operating income and never touches cap rate. That exclusion is the entire point of the metric: it lets you compare two buildings without their owners' loans getting in the way.
Should cap rate use the purchase price or the all-in cost?
Both are used. Price is the market convention and the right basis for comparing against other listings. All-in cost, price plus closing and rehab, tells you what the money you actually spent is yielding, which is the stricter and more honest read on a value-add deal. The calculator shows price as the headline and all-in cost just below it.
How do I work out the maximum price for a target cap rate?
Divide net operating income by the cap rate you want. At $24,000 of NOI and a 7% target, the most you can pay is roughly $343,000. The calculator does this back-solve automatically from the NOI it just built, so the answer moves as you adjust rent, vacancy, or expenses.
Can I trust the math?
Every formula here is cross-checked against an independent simulation written from scratch, the same verification we run on our paid Rental Property Analyzer. The two implementations match to the cent.