REDOSFree Cap Rate Calculator
Net operating income divided by price — the number that lets you compare two properties fairly. Free. No login.
Cap rate ignores your mortgage on purpose — it measures the property, not the deal you financed. That is what makes two properties comparable.
Marginal — negotiate harder or improve the terms.
Cash-on-cash 6.1% — acceptable for a rental.
How this cap rate was built
You don't just need the numbers. You need to know what to fix.
Free calculators hand you a spreadsheet. REDOS reads your deal and tells you exactly where it's weak — and how to save it.
6.1% return on your cash (aim 8%+). Push the purchase price down or add income (unit, storage, laundry, pets).
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What a cap rate actually tells you
Cap rate is the return a property produces on its own, before any financing. That is the whole point: two investors can buy the same building with completely different loans and get completely different cash-on-cash returns, but the cap rate is the same for both. It measures the asset, not the deal you structured around it.
- 1
Add up the rent
Gross annual rent — everything the property collects in a year.
- 2
Subtract operating expenses
Taxes, insurance, management, maintenance, vacancy. Not the mortgage — that is financing, not operations.
- 3
That is your NOI
Net operating income: what the property earns before debt.
- 4
Divide by the price
NOI ÷ purchase price = cap rate. Higher is more income per dollar spent.
The mistake almost everyone makes first is including the mortgage payment in expenses. Do that and you are not calculating a cap rate — you are calculating something closer to cash-on-cash, and you can no longer compare the property to anything else. This calculator deliberately runs the numbers all-cash for that reason.
Frequently asked questions
What is a good cap rate?
It is local, not national. In most US markets 5–8% is a normal range for residential rentals. A higher cap rate usually means more risk or a rougher area; a lower one usually means an expensive, stable market where buyers accept less income for more safety. Compare against other properties in the same market, never against a national average.
How do you calculate cap rate?
Cap rate = net operating income ÷ purchase price. NOI is your gross annual rent minus annual operating expenses — taxes, insurance, management, maintenance, vacancy allowance. The mortgage is deliberately excluded.
Should the mortgage be included in a cap rate?
No. Cap rate measures the property, not your financing. Including debt service makes the number depend on your loan terms, which defeats the purpose — you could no longer compare two properties, or the same property across two buyers.
Cap rate vs cash-on-cash — what is the difference?
Cap rate ignores your loan and tells you what the asset produces. Cash-on-cash includes the loan and tells you what YOUR money earns after the mortgage is paid. Leverage can make a mediocre cap rate into a strong cash-on-cash return, and can also wipe it out.
Is this cap rate calculator free?
Yes — free, no login, no credit card. It runs the same engine as the paid REDOS analyzer.