Cap Rate Calculator

How To Use Our Cap Rate Calculator

There are 4 primary variables being used in our calculator. We will now explain each variable in greater detail to help avoid any confusion. If you have additional questions about capitalization rate, our in-depth cap rate guide may prove helpful. 

Property Value

This is the current market value of the property that you are analyzing. If you aren’t 100% sure of the property’s current value, our free online ARV calculator can help you assess the value, based on the selling price of comparable properties in the area.

Gross Rental Income

This is the annual rental income that you are expecting to receive from the rental property.

Vacancy Rate

The Vacancy rate represents the percentage of the year that you are expecting to be without a tenant. It is a cost that should be factored into your rental property calculations. Generally, it is advisable to use a vacancy rate between 6-8%. For this reason, we have used 7% as the default vacancy rate, but you can obviously change it to match your expectations. 

Operation Expenses

The operating expenses are the total expenses that you are expecting to incur throughout the year, excluding the cost of the mortgage.  For this calculator, it is being expressed as a percentage of the gross rental income.

While the exact operating expenses will vary from property to property, a quick rule of thumb is to assume that the property will incur expenses that are between 40%-50% of the gross rental income. 

There is even a name for this rule of thumb. Property investors call it ‘the 50% rule’. It means that if your gross rental income is $50,000, your property operating expenses are likely to be about $25,000. Like any real estate rule it isn’t perfect, but it is a good way to quickly estimate the potential operating expenses of a rental property. 

Additional Real Estate Calculators & Resources

Rental Property Calculator: Workout the potential profitability of an investment property with our Rental Property Calculator.

Hard Money Calculator: To figure out the ROI of a fix and flip, you need a comprehensive Hard Money Calculator. It allows you to workout the monthly repayments, analyze net operating income, calculate the return on investment when you sell the property.

BRRRR Calculator: Each step in the Buy, Rehab, Rent, Refinance, Repeat (BRRRR) requires detailed analysis before you proceed with the deal. Fortunately our BRRRR Calculator breaks the process down into simple phases that are pretty easy to understand.

Home Appreciation Calculator: To workout how much your home will be worth in the future, you simply need to know the interest rate and how long you expect to hold the property for. With our simple Home Appreciation Calculator, you can workout the future value of your home very quickly.

ARV Calculator: Quickly assess the After-Repair Value of a property with our user friendly ARV Calculator.

FlipScout: FlipScout is a free search engine for property flippers. It lets you find properties that you can earn the highest return on when completing a fix and flip or fix-to-rent project. You can learn more about FlipScout here.