CAP Rate Calculator

Purchase price $: projected purchase price for the property plus additional acquisition costs such as closing costs and/or renovation costs.
Gross monthly income $: total rental income plus any other income generated by the property per month. Other income might include money generated from laundry and other vending machines or renting some storage space.
Vacancies allowance %: estimated percentage of the year that the property may be vacant. A typical estimate might be 4% (2 weeks).
Annual Operating expenses % (total annual expenses ÷ gross annual income): annual expenses such as property taxes, insurance and maintenance. The below defaults use a value of 28%. Example: 6000 (taxes) + 2500 (insurance) + 3260 (maintenance) = 11,760. Gross monthly rent 3500 x 12 (months) = $42,000 (gross annual income). 11,760 ÷ 42,000 = 28%.
If you pay someone to manage the property, add that cost as an expense. Some formulas also factor in reserves for replacements (money set aside to replace short-lived items like appliances). Keep in mind, when comparing properties against one another, remember to include the same variables for each property.