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Enter a property’s price, annual rent, vacancy, and operating expenses to get its capitalization rate and net operating income (NOI). Cap rate = NOI ÷ property value.
Estimate only. Operating expenses exclude mortgage/debt service and capital expenditures. Cap rate ignores financing.
Cap rate (capitalization rate) measures a rental property’s unleveraged return: Cap Rate = Net Operating Income ÷ Property Value. NOI is your effective gross rent (annual rent minus vacancy) minus operating expenses — property tax, insurance, management, maintenance, utilities, and HOA — but not your mortgage payment. In California, coastal/appreciation markets often run 3–4% cap rates while Inland Empire and Central Valley cash-flow markets run 5–7%.
Financing a rental? A DSCR loan qualifies on the property’s income, not your tax returns. Learn more in our cap rate guide or size the whole deal with the rental property calculator.
It depends on the market and risk. In California, 5–7% is common in cash-flow markets like the Inland Empire and Central Valley, while coastal appreciation markets often trade at 3–4%. A higher cap rate means more income relative to price, but sometimes more risk.
No. Cap rate is an unleveraged metric — it uses net operating income, which excludes your mortgage payment (debt service). To measure your leveraged return, use cash-on-cash return instead.
Take your annual gross rent, subtract vacancy, then subtract operating expenses (taxes, insurance, management, maintenance, utilities, HOA). Do not subtract the mortgage, capital expenditures, or depreciation.
For a buyer, a higher cap rate means more income per dollar of price, but it can signal a riskier area or property. Lower cap rates usually reflect safer, higher-appreciation markets. Compare within the same market.
We arrange DSCR and hard money loans for California investors — no tax returns, close in an LLC. Free quote, no credit pull to start.