Cap rate is how you compare rental properties on equal footing — it strips out financing and shows the raw earning power of the building itself. Enter the numbers below for net operating income (NOI) and cap rate.
Cap rate = NOI ÷ property value, where NOI is annual gross rent minus all operating expenses — everything except the mortgage payment. Debt is excluded on purpose: cap rate prices the property, not your loan.
Residential rentals typically trade at 4–8% cap rates. Higher cap = more income per dollar of price, often with more risk or management intensity. Comparing a 6% cap to a 7% cap across markets is the whole point — the mortgage terms are yours, the cap rate is the property’s.
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No — cap rate uses only operating expenses (taxes, insurance, maintenance, vacancy, management, HOA). Financing is excluded so properties can be compared regardless of how they’re financed.
Roughly 4–10% depending on market. Below 4% usually means you’re paying for appreciation; above 8% often signals higher risk or management burden.
Cap rate ignores your loan; cash-on-cash includes it. Use cap rate to compare properties, cash-on-cash to evaluate your actual return.
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Manage your property free on 10DoorsThis template is provided for general informational purposes and does not constitute legal advice. Landlord-tenant law changes and local ordinances may impose additional requirements — verify current state and local rules before serving any notice. Last reviewed September 2026.