Cap Rate Calculator
Calculate the capitalization rate for a rental investment property.
Assumptions used in this calculation
- NOI excludes financing: Net operating income is calculated before any mortgage payment, the standard convention for comparing properties independent of how they're financed.
- Rental income assumed effective: Annual rental income entered is treated as already accounting for expected vacancy. If you're entering gross potential rent, reduce it first or add a vacancy allowance to operating expenses.
About this calculator
Comparing rental properties by price or rent alone breaks down the moment financing enters the picture, one buyer paying cash and another taking a large mortgage will have wildly different cash-on-cash returns on the identical property, which is why real estate investors lean on cap rate as a financing-neutral comparison metric. This calculator subtracts annual operating expenses from annual rental income to get net operating income (NOI), then divides that by property value and expresses it as a percentage. Three inputs, property value, annual rental income and annual operating expenses, replace manually netting expenses against income and then dividing correctly by the property's full value rather than your invested cash. Because it deliberately ignores your mortgage payment, cap rate lets you rank several properties by their income-generating quality alone, before layering in how each deal happens to be financed.
Worked example
₹60L property, ₹4.8L rental income, ₹96,000 expenses
Result: Cap rate = 6.4%
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