Follow the default numbers.
With purchase price of $350,000, monthly rent of $2,400, the model gives cap rate: 5.09%.
The formula is cap rate = noi ÷ value. Open the breakdown to trace expenses and assumptions. Change one input at a time to see how your decision changes. This example uses scenario inputs; it is not an offer, tax bill, appraisal or legal determination.
Cap rate leaves financing out
Capitalization rate divides annual net operating income by property value. NOI subtracts vacancy and ordinary operating costs, including property tax and insurance, but excludes principal, interest, depreciation and the capital reserve. Two buyers using different loans can therefore calculate the same cap rate for one property. Cash on cash answers the separate question of what a financed buyer earns on invested cash.
Reverse a target rate into a price
Dividing NOI by a target cap rate produces the value supported by that income and return requirement. It does not appraise the property or predict the seller’s willingness to accept an offer. If projected rents are above current rents, run both scenarios. A low cap rate can reflect growth expectations, location, condition or risk; there is no universal rate that makes a deal good.
Use the post-purchase expense picture
Property tax may reset after a sale and insurance pricing can differ for a new owner. Include a realistic management fee even if you intend to self-manage, so your comparison recognizes the work involved. Recurring repairs belong in operating expenses. Large replacements belong in a capital plan; this calculator shows that reserve after NOI to keep the cap-rate definition consistent.
Compare like with like
Compare properties using the same income period and expense classification. A advertised cap rate using gross rent or excluding taxes is not comparable to the result here. Review actual leases, trailing expenses, vacancy and major repair needs. The next useful check is debt coverage: a property can have an attractive unlevered return and still fail to support the quoted financing.
Keep your assumptions with the result
Save the calculation to your deal file to reuse compatible inputs in another tool. The file stays in this browser on this device. Download the CSV to open the complete inputs, results and schedule in Excel or Google Sheets. Use PDF to print the report or save it as a PDF. A share link includes entered financial figures in its URL, so use it only with people you intend to share those numbers with.