Cap Rate Calculator — Rental Property Capitalization Rate
Calculate the cap rate (capitalization rate) for any rental property in Canada or the US. Enter purchase price, gross rent, vacancy, and expenses — get your cap rate, NOI, and Gross Rent Multiplier instantly. Free.
Capitalization rate (NOI ÷ Property Value) is the foundational metric for comparing income properties — it tells you the unlevered yield before financing. In Toronto and Vancouver, cap rates of 3–5% are typical; secondary markets like Calgary and Halifax often trade at 5–7%+. Enter the purchase price, gross rents, and expenses to calculate cap rate, NOI, and value at any target cap rate.
Inputs
Taxes, insurance, maintenance, PM fees — exclude mortgage
Results
Cap Rate
NaN%
Net Operating Income (NOI)
$NaN
Annual Gross Rent
$36,000
Gross Rent Multiplier (GRM)
13.89
Understanding This Calculator
Learn what capitalization rate measures, how to compute NOI correctly, and how to use cap rate to compare income properties.
How the math works
Cap rate = NOI ÷ Purchase price, where NOI = effective gross rent − operating expenses. Effective gross rent is annual rent adjusted for vacancy: monthly rent × 12 × (1 − vacancy rate). Operating expenses include property taxes, insurance, maintenance, and management fees — but never the mortgage, because cap rate is deliberately an unlevered metric that describes the property, not your financing.
The calculator also reports the Gross Rent Multiplier: GRM = Purchase price ÷ annual gross rent — a quick screening ratio (lower is cheaper relative to rent) that ignores expenses entirely.
Worked example
Using the defaults: a $500,000 property renting for $3,000/month with 5% vacancy and $8,000 annual operating expenses.
- Annual gross rent = 3,000 × 12 = $36,000
- Effective gross rent = 36,000 × 0.95 = $34,200
- NOI = 34,200 − 8,000 = $26,200
- Cap rate = 26,200 ÷ 500,000 = 5.24%
- GRM = 500,000 ÷ 36,000 ≈ 13.9
Read the cap rate as the cash yield you would earn if you paid all cash and financing were irrelevant.
How to read the result
Cap rates are only meaningful relative to the local market. In high-demand Canadian cities like Toronto and Vancouver, 3–5% is typical; secondary markets such as Calgary or Halifax often trade at 5–7%+. A cap rate well above the local norm usually signals extra risk — deferred maintenance, weak tenancy, or a declining area — rather than a bargain.
Use cap rate to compare properties on equal footing and to sanity-check a price: value ≈ NOI ÷ market cap rate. Then pair it with levered metrics (cash-on-cash, DSCR) to see how the deal performs with your actual mortgage.
Common mistakes
- Including mortgage payments in expenses — that turns cap rate into a different (and misleading) number.
- Using the seller's pro-forma rent instead of actual or realistic market rent.
- Forgetting a vacancy allowance and a maintenance/CapEx reserve, which inflates NOI.
- Comparing cap rates across different markets or property classes as if they were interchangeable.