Cap rate
Also called capitalization rate. Last reviewed Oct 8, 2026 by Jeremy Werden
Cap rate (capitalization rate) is a property's yearly net operating income as a percentage of its price or value, ignoring financing: $28,000 of NOI on a $400,000 home is 7%. BNBCalc uses the purchase price and leaves property tax out of operating income, so at default tax rates its cap rate runs about a point higher.
Cap rate = net operating income ÷ purchase price
How BNBCalc calculates it
Cap Rate = year-one operating income ÷ purchase price
Operating income here is revenue minus operating expenses, and property tax isn't one of them, since BNBCalc keeps it with the loan under Mortgage & Taxes. That's why its cap rate runs higher than one that treats property tax as a running cost.
A worked example
A $400,000 home with $60,000 of revenue and $27,780 of operating expenses has $32,220 of operating income, so BNBCalc shows a cap rate of $32,220 ÷ $400,000 = 8.1%. Subtract the $3,960 of property tax as well, as many investors do, and you'd get about 7.1%.
Is it a good cap rate?
Compare like with like. At BNBCalc's default property tax of 0.99% of the price, its cap rate sits about a point above the textbook figure, so knock that off before you hold it up against a broker's number or a rule of thumb. BNBCalc's guides What is Cap Rate? A Comprehensive Guide for Airbnb Hosts and What Is a Good Cap Rate for an Airbnb Property? go further.
Where you'll see it
This cap rate appears on Buy and Own analyses, on the Short Term Rental card and in Investment Value Over Time. The Long Term Rental card's cap rate uses its own math, which also subtracts Mortgage & Taxes, so don't compare the two directly. Rent analyses show a payback period instead.