Calculator · Buy and hold

Cap rate and 1% rule calculator

Three fast screens before you run a full analysis: cap rate, gross rent multiplier and the 1% rule.

Results

Updates as you type. The formulas are under "How this is calculated" below.

Cap rate
NOI
Cash-on-cash return
Gross rent multiplier
Rent / price (monthly)
Meets the 1% rule?
Rent needed for 1%

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How to use this calculator

Enter the purchase price and total monthly rent.
Enter a vacancy allowance and your yearly operating expenses (not the mortgage).
Optionally enter your annual cash flow after the mortgage and the cash you invested to see cash-on-cash.
Read the cap rate, gross rent multiplier and the 1% rule check.
Want practice first? Play Grade the Deal, a guess-the-cap-rate game.

Worked example

Say a property costs $250,000 and rents for $2,300 a month, with 5% vacancy and $9,000 a year of operating expenses (the values loaded above).

NOI is $17,220, so the cap rate is 6.89%.

Gross rent multiplier is 9.06 (price divided by yearly rent).

Monthly rent is 0.92% of price, so it does not meet the 1% rule. You would need about $2,500 a month.

If annual cash flow after the mortgage is $2,500 on $94,600 invested, cash-on-cash is 2.64%.

How this is calculated

NOI = monthly rent x 12 x (1 - vacancy %) - operating expenses
Cap rate = NOI / price Financing does not change cap rate.
Cash-on-cash = annual cash flow after mortgage / cash invested
Gross rent multiplier = price / (monthly rent x 12) Lower is cheaper relative to rent.
1% rule: monthly rent / price >= 1% A rough screen. In high-price markets few deals pass, and passing does not mean the deal cash flows.

Frequently asked questions

What is a cap rate?

Capitalization rate is NOI divided by the purchase price. It shows the yearly return of a property if you paid all cash, which makes it handy for comparing properties without financing.

What is a good cap rate?

It depends on the market, property type and risk. Higher cap rates often come with higher risk or weaker markets. Compare against similar properties nearby rather than a single target number.

What is the 1% rule?

The 1% rule says monthly rent should be at least 1% of the purchase price. It is a rough screen only. A property can pass and still lose money, or fail and still do fine.

What is a gross rent multiplier?

Gross rent multiplier is the price divided by yearly rent. A lower number means you pay less per dollar of rent. It ignores expenses, so use it only as a first look.