Cap rate calculator
Divide net operating income by property value to get the cap rate, the unlevered yield of a rental before any mortgage. Enter your two numbers below for an instant answer.
NOI = gross annual rent − operating expenses (taxes, insurance, management, maintenance vacancy), not the mortgage payment. Cap rate measures unlevered return.
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The cap rate formula
NOI = gross annual rent minus operating expenses (taxes, insurance, management, maintenance, vacancy). It excludes the mortgage payment, so cap rate is the return you would earn owning the property free and clear. The default above, $18,000 NOI on a $350,000 property, works out to 5.14%. Hold the value steady and a $2,000 swing in NOI moves the cap rate by about 0.6 points, which is why your expense estimate matters as much as the price.
What cap rate signals a cash-flow market
Cap rate is one of four inputs in our Investor Yield Index, which ranks 18 U.S. metros on live Zillow home-value and rent data. Across the 18, cap rate runs from about 3.8% in Phoenix to 8.5% in Birmingham. The cheaper Midwest and Southern metros sit near the top, while pricey coastal and Sun Belt markets land closer to 4%. Only the four highest clear the 1.2 DSCR most lenders require, so a high cap rate today is a relative signal, not a promise of positive cash flow.
| Metro | Cap rate | DSCR | Cash-on-cash |
|---|---|---|---|
| Birmingham, AL | 8.5% | 1.45 | +9.5% |
| Memphis, TN | 8.3% | 1.42 | +8.8% |
| Chicago, IL | 7.2% | 1.23 | +4.8% |
| Cleveland, OH | 7.2% | 1.22 | +4.6% |
| Phoenix, AZ | 3.8% | 0.65 | -7.4% |
Cleveland tops the Index at 100 even though Birmingham and Memphis post higher cap rates, because the score also weighs DSCR and cash-on-cash, and Cleveland clears the qualifying line with room to spare. On a 25% down deal at today's 6.8% mortgage rate, positive cash flow tends to start near a 6% cap rate, but clearing the 1.2 DSCR a lender wants takes closer to 7%.
Index figures use live Zillow data with a 6.8% market-rate mortgage estimate, not lender quotes. See the full ranking →
Common questions
How is cap rate calculated?
Cap rate = net operating income ÷ property value. NOI is gross annual rent minus operating expenses (excluding the mortgage). It measures unlevered return.
What is a good cap rate?
It depends on market and risk. In 2026, 5 to 7% is common for solid single-family rentals, while 8% or more usually shows up only in cheaper, riskier markets. See what is a good cap rate for detail.
Does cap rate include the mortgage?
No. Cap rate is an unlevered metric, so it ignores financing. For your return with a mortgage, use cash-on-cash return instead.