Cap Rate Calculator
Calculate the capitalization rate and gross rent multiplier for a rental property investment.
Results
What is it?
The Capitalization Rate (cap rate) measures the return on a real estate investment by dividing Net Operating Income (NOI) by the property value. It lets you compare investment properties regardless of size. The Gross Rent Multiplier (GRM) is a simpler ratio of price to gross rent.
How to use
Enter the property value or purchase price, the total annual rental income, and all annual operating expenses (taxes, insurance, maintenance, management fees, vacancy reserves). Do not include mortgage payments — cap rate is calculated before financing.
Example scenario
A $300,000 property earning $30,000/year in rent with $8,000 in expenses has an NOI of $22,000, a cap rate of 7.33%, and a GRM of 10.0. A higher cap rate means a potentially better return.
Pro tip
Cap rates of 5-10% are typical. Lower cap rates often indicate lower risk or higher-appreciation markets. Always verify that expenses include realistic vacancy (5-10%), maintenance (1% of property value), and property management (8-10% of rent).