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Cap Rate Calculator
Calculate NOI and capitalization rate — the standard metric for comparing rental properties on equal footing.
Property
Annual operating expenses
Capitalization rate
5.75%
Market range
Net operating income (NOI)
$28,752
Annual rent net of opex
Effective rent
$45,600
After vacancy allowance
Total operating expenses
$16,848
Incl. $3,648 mgmt
Monthly NOI
$2,396
Income to service debt
Analysis & insights
Your cap rate is 5.8% (NOI of $28,752 on a $500,000 purchase price). That's a 1.6 percentage-point premium over the risk-free 10-year Treasury — a modest premium. Verify you have a strong appreciation thesis to justify the work. Operating expenses run 37% of effective rent — within the typical 35-50% range for residential rental.
Market-rate yield
5.8% cap is the typical range for stabilized properties in healthy secondary markets.
Risk & benchmark gauge
Current band
Market range
5.8% cap rate
Industry benchmarks
- Your cap rate5.8%
- Class A multifamily (national)4-5%
- Class B multifamily6-7%
- Class C / value-add8-10%
- 10-year Treasury (risk-free)~4.2%
Key insights
Risk premium: 1.6 pts over Treasuries
Modest premium over Treasuries — accept only if you have strong appreciation thesis.
Operating expense ratio: 37%
Within the healthy 35-50% range for residential rental property.
Cap rate is a no-leverage metric
This is the yield as if you paid all cash. Once you add financing, your cash-on-cash return can be dramatically higher (or lower) — run the Cash on Cash calculator next.
Scenario analysis
Current scenario
5.8%
NOI $28,752 ÷ price $500,000.
Rent +5%
6.5%
+0.48 pts
Modest rent growth often achievable within 1-2 years through unit improvements or market correction.
Opex -10%
6.1%
+0.34 pts
Negotiating insurance + property tax appeal + smarter maintenance typically yields 5-15% opex reduction.
Vacancy doubles to 10%
5.3%
-0.48 pts
A market softening that pushes vacancy from 5% to 10% takes a significant bite out of your cap rate.
Recommended actions(3)
Verify rent comps in the same submarket
Medium priorityProperty listings often quote optimistic rents. Pull actual rented prices from Rentometer, Zillow Rent Estimate, and local property manager data.
Underwrite for value-add upside
Medium priorityIdentify 2-3 specific improvements (unit upgrades, RUBS implementation, amenity additions) that justify rent increases. This is where most real estate returns are made.
Re-check after closing
Quick winYour actual NOI in year 1 is usually within 5-15% of proforma. Track monthly to identify variance drivers early.
Find the Best Mortgage Rate
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This tool is for educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional for advice specific to your situation.
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