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Rental property calculator: cap rate, NOI and rental yield

Analyze a rental property: gross yield, net operating income, cap rate, cash-on-cash return for an all-cash purchase, and the 1% rule check.

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Results

Cap rate

5.67%

Typical In line with many single-family and small multifamily rentals.

Net operating income (NOI)

$17,025

Gross rental yield
9.20%
Cash-on-cash return (all-cash purchase)
5.46%
Gross rent multiplier
10.9 ×
Monthly rent as a share of price (1% rule)
0.77%
Annual operating expenses
$9,195
Monthly NOI
$1,419

Returns by monthly rent

Gross rental yieldNet operating income (NOI)Cap rate
$1,900/mo current7.60%$13,1944.40%
$2,100/mo current8.40%$15,1105.04%
$2,300/mo current9.20%$17,0255.67%
$2,500/mo current10.00%$18,9406.31%
$2,700/mo current10.80%$20,8556.95%
$3,000/mo current12.00%$23,7287.91%

Size up a rental before you buy

Listings love to quote a gross yield based on rent and price alone. Once you account for vacancy, property tax, insurance, HOA dues, maintenance, capital reserves and management, the picture is usually less rosy. This calculator works out the net operating income (NOI) and the cap rate, the standard yardsticks investors use to compare rental properties regardless of how they are financed.

The formulas

Potential gross income = (monthly rent + other income) × 12

Effective gross income = potential income × (1 − vacancy %)

Operating expenses = property tax + insurance + HOA + (maintenance % + management %) × effective income

NOI = effective income − operating expenses

Cap rate = NOI ÷ purchase price × 100

NOI deliberately excludes mortgage payments, income tax and depreciation, so two properties can be compared on the same basis.

Worked example: a $300,000 single-family rental

Rent $2,300 a month, 5% vacancy, $3,600 property tax, $1,400 insurance, no HOA, 8% maintenance and 8% management.

  1. Potential income: 2,300 × 12 = $27,600.
  2. Effective income: 27,600 × 95% = $26,220.
  3. Maintenance and management: 16% × 26,220 = $4,195.
  4. Operating expenses: 3,600 + 1,400 + 4,195 = $9,195.
  5. NOI: 26,220 − 9,195 = $17,025 a year, about $1,419 a month.
  6. Cap rate: 17,025 ÷ 300,000 = 5.67%. Gross yield is 9.2%, and rent is 0.77% of the price, short of the 1% rule.

Sensitivity to rent

Monthly rent Gross yield NOI Cap rate
$1,900 7.60% $13,194 4.40%
$2,100 8.40% $15,110 5.04%
$2,300 9.20% $17,025 5.67%
$2,500 10.00% $18,940 6.31%
$2,700 10.80% $20,855 6.95%
$3,000 12.00% $23,728 7.91%

Because taxes and insurance are fixed, every extra $100 of rent adds almost $960 to NOI.

Beyond the cap rate

  • Financing: with a mortgage, look at cash flow after debt service and at cash-on-cash return on the money you actually put in. A cap rate below your mortgage rate usually means negative leverage.
  • Taxes: in the US, rental income is taxed as ordinary income, but depreciation (27.5 years for residential property) and deductible expenses often shelter much of it.
  • Capital expenditures: roofs, HVAC and water heaters do not show up every year, which is why a reserve percentage belongs in the expenses.
  • Local rules: rent control, licensing and short-term rental restrictions can cap your income.

Run every property through the same assumptions so you are comparing deals, not optimism.

Frequently asked questions

How do you calculate cap rate?

Cap rate = net operating income ÷ purchase price. NOI is the rent you actually collect (after vacancy) minus operating expenses such as property tax, insurance, HOA, maintenance and management, but not mortgage payments. A $300,000 rental with $17,025 of NOI has a 5.7% cap rate.

What is a good cap rate for a rental property?

Many investors look for 5% to 8% on residential rentals. Lower cap rates are normal in high-demand, expensive markets where appreciation is expected; higher cap rates usually come with more risk, such as weaker locations, older buildings or more volatile demand.

What is the difference between cap rate and cash-on-cash return?

Cap rate measures the property's income against its price, independent of how you pay for it. Cash-on-cash return measures your annual pre-tax cash flow against the cash you actually invested, so it changes with your mortgage and down payment. This calculator shows cash-on-cash for an all-cash purchase including closing costs and repairs.

What is the 1% rule?

A quick screening rule: monthly rent should be at least 1% of the purchase price, so $3,000 a month for a $300,000 home. Few properties meet it in expensive markets today. Treat it as a filter, not a substitute for a full NOI analysis.

Which expenses do beginners forget?

Vacancy, capital expenditures (roof, HVAC, water heater), property management even if you self-manage today, turnover costs between tenants, and rising property taxes after a sale triggers reassessment. Leaving them out can make a weak deal look like a great one.

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Results are estimates provided for information purposes. They do not replace professional advice.

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