Cap Rate Calculator
Cap rate measures a property’s income relative to its price, before any loan. Enter the price, rent, vacancy and operating expenses.
Cap Rate Calculator
Enter your numbers; the result appears here.
Have a question about your situation, want tips, or need a referral? Email the CLRC team at [email protected]. We share general information, not legal advice, and we’re not a law firm.
Cap rate = NOI ÷ purchase price
How to use it
Cap rate (capitalization rate) lets you compare properties without regard to financing. A higher cap rate means more income per dollar of price, usually with more risk or a weaker location. The number is only as good as the expense figure: use actual or well-sourced numbers, including property tax, insurance, repairs, management, and any utilities you pay. Rent-controlled units and properties with deferred maintenance can look better on paper than they are.
Worked example
Price $650,000, rent $3,200/month, 5% vacancy, $12,500 operating expenses: income $38,400 − vacancy $1,920 = $36,480; NOI = $36,480 − $12,500 = $23,980; cap rate = $23,980 ÷ $650,000 = 3.69%.
Rent assumptions must respect the statewide rent cap and any local rent-control or just-cause rules. Use the free rent increase calculator and check your county page before you plan on a rent increase. Vacancy and turnover also depend on notice and deposit timing: see the notice date calculator and deposit calculator.
Frequently asked questions
What is a good cap rate?
There is no single answer. It depends on the market, property type and risk. Compare similar properties in the same area, and compare the cap rate to your cost of borrowing.
Does cap rate include the mortgage?
No. Net operating income excludes loan payments, depreciation and income tax. That is what makes it useful for comparing properties.
Should I use the asking price or my cost?
Use the price you would pay. To judge an existing rental, you can also divide NOI by current market value.
Sources
- Civ. Code § 1947.12 (statewide rent cap)
- California Attorney General: limits on rent increases
- California DRE: Landlord-Tenant guide
This tool applies general California rules to the dates you enter. It cannot see your lease, your city’s ordinance or the facts of your situation. Check your local rent rules and consult a qualified attorney before you serve a notice or withhold a deposit. Read the disclaimer.