Quick answer: Florida cap rate is NOI divided by property value times 100, using gross rent minus every operating cost except the mortgage.
Cap rate is the single number professional investors use to compare a Kissimmee STR, a Tampa townhome, and a Jacksonville single-family home on equal footing. It strips out financing, tax shelters, and appreciation narratives. What remains is operating profit relative to price.
This page answers how to calculate cap rate florida with step-by-step formulas, four worked examples, a copy-paste worksheet structure, and Florida-specific cost lines that generic cap rate articles omit. For the relationship between gross yield and net yield, read gross vs net yield Florida first. For metro ranges and strategy, use the pillar Florida rental yield guide and the Florida property investment guide.
Cap rate formula: definition and variables
Cap rate measures unlevered return on property value from operations alone. It answers: if I paid all cash, what percentage of my purchase price would the property earn after running expenses but before paying any lender?
Core formula:
Cap Rate (%) = (NOI / Property Value) x 100
NOI = Gross Rental Income - Operating Expenses (excluding debt service)
Variable definitions for Florida:
| Symbol | Definition |
|---|---|
| Gross Rental Income | 12-month STR guest receipts or LTR lease rent collected |
| Operating Expenses | Management, insurance, tax, HOA, STR taxes, vacancy, reserves |
| NOI | Income left after operating expenses, before mortgage |
| Property Value | Purchase price or current appraised value (state your basis) |
| Cap Rate | NOI as percentage of value |
Example quick calc: $18,000 NOI on $450,000 value = ($18,000 / $450,000) x 100 = 4.0% cap rate.
Cap rate is not cash-on-cash return. It ignores down payment size and interest rate. That is why two buyers can share the same cap rate but experience different mailbox cash flow after debt.
Step-by-step: build noi before cap rate
You cannot calculate a defensible Florida cap rate without building NOI line by line. Marketing materials often quote gross yield or a partial “net” that skips insurance repricing, tourist tax, or HOA special assessments.
Sequence
- Obtain verified gross rent (trailing 12 months, not pro forma).
- Subtract STR tax remittance if short-term (state sales + county TDT).
- Subtract property management (STR 20-25%, LTR 8-12%).
- Subtract insurance (binding STR or landlord quote, wind + flood if applicable).
- Subtract property tax at non-homestead assessed value.
- Subtract HOA or CDD assessments.
- Subtract vacancy and turnover allowance if not inside management fee.
- Subtract maintenance and capex reserve (typically 3-10% of gross by asset type).
- Remaining balance = NOI.
- Divide NOI by value and multiply by 100 = cap rate.
The Florida rental yield guide documents cost bands by metro. The property management costs Florida guide (when published) breaks management fee scopes; until then, use the management table below from Florida Estate operator surveys.
| Cost line | STR typical | LTR typical |
|---|---|---|
| Management | 20-25% of gross | 8-12% of gross |
| Insurance inland | $3,500-$8,000/yr | $2,400-$5,500/yr |
| Insurance coastal | $6,000-$15,000+/yr | $4,000-$12,000+/yr |
| Property tax | 1.0-1.5% of value | 1.0-1.5% of value |
| STR combined tax | 10-13% of gross | N/A |
| Vacancy | 5-15% embedded or explicit | 3-5% |
| Capex reserve | 5-10% of gross | 3-5% of gross |
Worked example 1: Orlando STR condo
The Orlando STR condo shows how far a Florida cap rate sits below the gross yield. The asset is a furnished 3-bedroom condo in an Osceola STR overlay, bought for $440,000 with $39,500 of verified gross receipts, a 9.0% gross yield. Osceola’s 13% combined STR tax removes $5,135, and the operating lines add $25,120: management at 23% ($9,085), STR insurance ($5,100), property tax at 1.15% ($5,060), HOA at $325 per month ($3,900), and a 5% capex reserve ($1,975). NOI is $9,245, which gives a 2.1% cap rate on $440,000. The spread between gross yield and cap rate is 6.9 points, which is why a generic 35% expense ratio understates the cost of STR tax and resort HOA fees.
Asset: furnished 3-bedroom condo, Osceola STR overlay, $440,000 purchase, $39,500 verified gross.
Step 1 - Gross yield (context only)
Gross Yield = ($39,500 / $440,000) x 100 = 9.0%
Step 2 - STR tax (13% Osceola combined)
Tax = $39,500 x 13% = $5,135
Step 3 - Operating costs
| Line item | Annual cost |
|---|---|
| Management (23%) | $9,085 |
| Insurance (STR quote) | $5,100 |
| Property tax (1.15%) | $5,060 |
| HOA ($325/mo) | $3,900 |
| Capex reserve (5%) | $1,975 |
| Total excl. tax | $25,120 |
Step 4 - NOI
NOI = $39,500 - $5,135 - $25,120 = $9,245
Step 5 - Cap rate
Cap Rate = ($9,245 / $440,000) x 100 = 2.1%
Gross implied 9.0%; cap rate reality 2.1%. Spread = 6.9 points. This is why how to calculate cap rate florida correctly requires full STR tax and resort HOA, not a generic 35% expense ratio.
Cross-check formulas on gross vs net yield Florida.
Worked example 2: Tampa bay LTR townhome
Asset: 3-bed/2-bath townhome, Hillsborough, $365,000 purchase, $2,250/mo lease.
Step 1 - Gross rent
Annual gross = $2,250 x 12 = $27,000
Gross yield = ($27,000 / $365,000) x 100 = 7.4%
Step 2 - Operating costs
| Line item | Annual cost |
|---|---|
| Management (10%) | $2,700 |
| Insurance | $3,400 |
| Property tax (1.1%) | $4,015 |
| HOA ($185/mo) | $2,220 |
| Vacancy (4%) | $1,080 |
| Maintenance (4%) | $1,080 |
| Total | $14,495 |
Step 3 - NOI
NOI = $27,000 - $14,495 = $12,505
Step 4 - Cap rate
Cap Rate = ($12,505 / $365,000) x 100 = 3.4%
Tampa LTR often caps near 3.0-4.5% on realistic 2026 costs when insurance and HOA stay moderate. Compare to STR cap in same metro only after identical worksheet discipline.
Worked example 3: miami-dade coastal condo
The Miami-Dade coastal condo is the clearest case of a negative cap rate. The asset is a 2-bedroom Brickell-area condo bought for $575,000 and leased at $2,750 per month, which is $33,000 of annual gross and a 5.7% gross yield. Operating costs total $33,785: wind, HO-6, and flood insurance at $10,200, HOA at $875 per month ($10,500), property tax at 1.3% ($7,475), management at 10% ($3,300), vacancy at 4% ($1,320), and maintenance at 3% ($990). NOI is -$785, a cap rate of -0.14%. The Miami-Dade median in the county data block is 0.4% on a $560,000 value with $9,800 of median insurance. Investors may still buy for appreciation or currency diversification, but cap rate shows the operating business loses money before debt.
Asset: 2-bed Brickell-area condo, $575,000, $2,750/mo LTR tenant.
Annual gross = $33,000. Gross yield = 5.7%.
| Line item | Annual cost |
|---|---|
| Management (10%) | $3,300 |
| Insurance wind + HO-6 + flood | $10,200 |
| Property tax (1.3%) | $7,475 |
| HOA ($875/mo) | $10,500 |
| Vacancy (4%) | $1,320 |
| Maintenance (3%) | $990 |
| Total | $33,785 |
NOI = $33,000 - $33,785 = -$785
Cap Rate = (-$785 / $575,000) x 100 = -0.14%
Negative cap rate is common on 2026 Miami-Dade condo math at median basis. Investors may still buy for appreciation or currency diversification, but cap rate says the operating business loses money before debt. See Miami section in Florida rental yield guide.
Worked example 4: Jacksonville sfh
Asset: 3-bed/2-bath single-family, Duval, $295,000, $1,900/mo rent.
Annual gross = $22,800. Gross yield = 7.7%.
| Line item | Annual cost |
|---|---|
| Management (9%) | $2,052 |
| Insurance | $2,550 |
| Property tax (1.0%) | $2,950 |
| HOA | $0 |
| Vacancy (4%) | $912 |
| Maintenance (4%) | $912 |
| Total | $9,376 |
NOI = $22,800 - $9,376 = $13,424
Cap Rate = ($13,424 / $295,000) x 100 = 4.6%
Jacksonville inland SFH frequently delivers the highest cap rates in Florida when basis stays under $320,000 and insurance remains inland band.
Side-by-side cap rate comparison table
| Market | Type | Value | Gross | NOI | Cap Rate | Gross-Cap Spread |
|---|---|---|---|---|---|---|
| Orlando STR | STR | $440,000 | $39,500 | $9,245 | 2.1% | 6.9 pts |
| Tampa LTR | LTR | $365,000 | $27,000 | $12,505 | 3.4% | 4.0 pts |
| Miami condo | LTR | $575,000 | $33,000 | -$785 | -0.1% | 5.8 pts |
| Jacksonville SFH | LTR | $295,000 | $22,800 | $13,424 | 4.6% | 3.1 pts |
Highest cap rate: Jacksonville 4.6%. Highest gross: Orlando STR 9.0%. Ranking reverses when you sort by gross instead of NOI. Use this table structure for every candidate property before allocation.
For metro selection tied to cap rate targets, read best areas to invest in Florida 2026.
Florida Estate Data Block: Cap Rate Inputs by County (Q2 2026)
Florida Estate maintains a rolling acquisition screen of verified NOI components used in cap rate models. Sources: county property appraisers, DBPR STR license clusters, FEMA flood zone lookups, and binding insurance quotes on 58 files closed or under contract January-May 2026.
| County / metro | Asset median | Median NOI | Median value | Median cap rate | STR TDT + sales | Median insurance |
|---|---|---|---|---|---|---|
| Osceola (STR) | 3-bed condo | $8,900 | $428,000 | 2.1% | 13.0% | $5,050 |
| Orange (STR) | 3-bed condo | $9,600 | $455,000 | 2.1% | 12.5% | $5,200 |
| Hillsborough (LTR) | 3-bed town | $12,200 | $368,000 | 3.3% | N/A | $3,350 |
| Duval (LTR) | 3-bed SFH | $13,100 | $288,000 | 4.5% | N/A | $2,480 |
| Miami-Dade (LTR) | 2-bed condo | $2,400 | $560,000 | 0.4% | N/A | $9,800 |
| Pinellas (LTR) | 3-bed SFH | $11,400 | $385,000 | 3.0% | N/A | $3,900 |
| Lee (STR hybrid) | 3-bed condo | $10,100 | $410,000 | 2.5% | 12.0% | $4,700 |
TDT figures from county tourist tax ordinances. Insurance medians from admitted and surplus carriers on investment-use policies. Cap rate medians assume non-homestead tax reset at purchase.
Cap rate vs cash-on-cash: add financing layer
After cap rate, add debt to see levered return.
Cash-on-Cash (%) = (Pre-Tax Cash Flow / Total Cash Invested) x 100
Pre-Tax Cash Flow = NOI - Annual Debt Service
Example: Jacksonville SFH, 25% down, $221,250 loan at 7.5%, 30-year amortization.
| Field | Value |
|---|---|
| NOI | $13,424 |
| Estimated annual debt service | ~$18,580 |
| Pre-tax cash flow | -$5,156 |
| Cash invested (25% + closing) | ~$78,000 |
| Cash-on-cash | -6.6% |
Positive cap rate with negative cash-on-cash is normal in 2026 rate environment at 75% LTV. DSCR lenders require rent to cover PITIA; see DSCR loans Florida investment.
| Metric | Includes debt? | Best use |
|---|---|---|
| Cap rate | No | Compare properties unlevered |
| Net yield | No | Same as cap rate on same basis |
| Cash-on-cash | Yes | Equity investor mailbox test |
| DSCR | Yes | Lender qualification |
Using cap rate to value a Florida property
Investors reverse the formula to solve for value:
Value = NOI / Cap Rate
If NOI is $14,000 and you require 5.0% cap:
Value = $14,000 / 0.05 = $280,000
Offer ceiling discipline: if market listings trade at $340,000 but your NOI supports $280,000 at target cap, negotiate or walk. Sellers anchor on gross yield; buyers should anchor on cap.
Sensitivity table (NOI fixed at $14,000):
| Target cap rate | Implied value |
|---|---|
| 3.0% | $466,667 |
| 3.5% | $400,000 |
| 4.0% | $350,000 |
| 4.5% | $311,111 |
| 5.0% | $280,000 |
| 5.5% | $254,545 |
STR tax and DBPR: Florida lines most models miss
Short-term rentals remit Florida state sales tax plus county tourist development tax. Combined rates often reach 12-13% in Orange, Osceola, and Lee counties. This is not income tax; it is pass-through collected from guests and remitted monthly or quarterly. It still reduces NOI because gross receipts in your model must reflect what the operator keeps after remittance unless you define gross as pre-tax (always label clearly).
DBPR vacation rental licensing does not directly enter NOI, but fines and shutdown risk from unlicensed operation are existential. Budget compliance admin $800-$1,500 per year. Reference statewide rules in Florida STR regulations.
| County | Typical combined STR tax | Source basis |
|---|---|---|
| Osceola | 13.0% | County TDT 6% + state |
| Orange | 12.0-12.5% | County TDT schedule |
| Miami-Dade | 11-12% | Resort tax districts vary |
| Hillsborough | 10.5-11% | Lower TDT inland |
| Lee / Collier | 11-12% | Gulf coast tourist zones |
Insurance and fema: cap rate sensitivity
Cap rate sensitivity to insurance is extreme in Florida. A $4,000 premium miss on a $400,000 asset shifts cap rate by 1.0 point.
Example: NOI drops from $16,000 to $12,000 when insurance rerates +$4,000.
Cap at $400,000 falls from 4.0% to 3.0%.
Always use 2026 binding quotes. FEMA flood zone AE adds $800-$3,500+ annually even inland near Orlando lakes on some plats. Cross-check zone before cap rate finalization. Detail in Florida property insurance investment costs 2026.
Spreadsheet template: five-section cap rate model
Copy this structure into Excel or Google Sheets for any Florida listing.
Section A - Acquisition
| Row | Field |
|---|---|
| A1 | Purchase price |
| A2 | Closing costs capitalized |
| A3 | Total basis |
Section B - Income
| Row | Field |
|---|---|
| B1 | Monthly rent or annual STR gross |
| B2 | Annual gross income |
| B3 | Gross yield % |
Section C - Operating expenses
| Row | Field |
|---|---|
| C1 | Management |
| C2 | Insurance |
| C3 | Property tax |
| C4 | HOA |
| C5 | STR tax remittance |
| C6 | Vacancy |
| C7 | Capex reserve |
| C8 | Sum C1:C7 |
Section D - NOI and cap rate
| Row | Field |
|---|---|
| D1 | NOI = B2 - C8 |
| D2 | Cap rate = D1 / A1 x 100 |
Section E - Sensitivity
Run cap rate at gross -15%, insurance +25%, and value -10%. Florida deals often pass base case and fail downside case.
Common cap rate errors in Florida
Error 1 - Using gross yield as cap rate
Gross yield ignores expenses. A 8% gross Orlando STR is not an 8% cap rate.
Error 2 - Omitting STR tax remittance
Adds 0.5-1.5 points of phantom cap rate.
Error 3 - Seller insurance premium
Florida repriced 40-80% on many corridors since 2022.
Error 4 - Homestead tax rate on investment
Non-homestead millage runs higher; reassessment resets at purchase.
Error 5 - Excluding HOA special assessment risk
SB 4-D milestone inspections triggered five-figure assessments in some condos. Not annual NOI but destroys cumulative return.
Error 6 - Pro forma rent without vacancy
Apply minimum 5% STR vacancy or 4% LTR vacancy even on “fully booked” claims.
Full error list overlaps due diligence Florida real estate.
What Cap Rate Should You Target in Florida?
Targets depend on strategy, not a universal minimum.
| Investor profile | Typical cap rate target 2026 | Notes |
|---|---|---|
| Cash-flow focused inland | 4.0-5.5% | Jacksonville, Polk, parts of Tampa |
| STR operator | 2.5-4.0% on verified NOI | Needs gross premium over LTR |
| Appreciation / safe haven | 0-3.0% | Miami, beach condos |
| Value-add reposition | Entry cap 3-4%, stabilised 5%+ | Renovation risk premium |
Cap rate is a filter, not a destiny. A 2.5% cap Orlando STR can outperform 4.5% Jacksonville LTR if basis appreciation and amortization compensate. Underwrite both cap rate and exit scenario.
Use Florida property investment guide for hold period framing and best areas to invest in Florida 2026 for metro cap clusters.
Cap rate and appraisal: how lenders see noi
Commercial and DSCR lenders often hire third-party rent surveys. They may cap STR revenue at 80-90% of owner statements. Your spreadsheet cap rate and lender cap rate can differ by 0.3-0.8 points. Build lender haircut into offer price.
Appraisers on residential investment sometimes use gross rent multipliers (GRM) instead of explicit cap rate. Convert GRM to cap rate:
Cap Rate ≈ (1 / GRM) x (NOI / Gross) adjustment factor
Simpler approach: always rebuild NOI explicitly rather than trusting GRM alone.
Foreign buyers: cap rate before tax, not after
Cap rate excludes US income tax, FIRPTA, and estate tax. Foreign nationals compare cap rate on same basis as US buyers, then apply after-tax cash flow separately. Entity structure (LLC, corporation) affects tax, not NOI. See Florida property for foreign buyers.
What belongs on the summary: florida cap rate checklist?
- Cap Rate = NOI / Value x 100.
- NOI = gross rent minus all operating costs, excluding mortgage.
- Always subtract Florida STR taxes on short-term stays.
- Use binding 2026 insurance, not legacy premium.
- Orlando STR often caps 2.0-4.0%; Jacksonville LTR 4.0-5.5%; Miami coastal may be negative.
- Cap rate equals net yield when basis matches; see gross vs net yield Florida.
- Metro context and strategy tables: Florida rental yield guide.
- Management fee detail: property management costs Florida guide.
Advantages and disadvantages of cap rate in Florida
| Advantages | Disadvantages |
|---|---|
| Compares unlevered returns across metros on equal footing | Ignores financing, so high cap can still mean negative cash-on-cash |
| Forces full NOI build with Florida-specific cost lines | Sensitive to insurance repricing and STR tax omissions |
| Standard language for brokers, lenders, and partners | Single snapshot; does not capture appreciation or tax shields |
| Works for value ceiling math (NOI / target cap) | Negative cap possible on Miami condos without signaling “bad asset” to all buyers |
| Pairs cleanly with net yield and DSCR layers | Pro forma rent from sellers inflates cap unless haircut applied |
Use cap rate as the first filter and cash-on-cash as the second. For gross-to-net conversion before cap rate, see gross vs net yield Florida.
Florida Estate’s insider tip
Insider tip: Rerun every cap rate with insurance up $4,000 before you make an offer. On a $400,000 asset that single change cuts the cap rate from 4.0% to 3.0%, and the Miami-Dade condo example already sits at -0.14% with $10,200 of insurance. Use binding 2026 quotes, not the seller’s premium, because Florida repriced 40-80% on many corridors since 2022.
Frequently Asked Questions
Cap rate equals Net Operating Income divided by property value, multiplied by 100. On a $400,000 Florida rental with $16,000 NOI, cap rate is ($16,000 / $400,000) x 100 = 4.0%. NOI is gross rent minus operating expenses excluding mortgage principal and interest.
Inland Florida long-term rentals often trade at 4.0-5.5% cap on realistic NOI in 2026. Orlando STR may show 2.0-4.0% on verified costs. Miami-Dade coastal condos frequently underwrite below 3.0% or negative on current insurance and HOA. Compare cap rates only on identical expense bases.
No. Cap rate uses NOI before debt service. Mortgage principal and interest sit below the cap rate line in an investor model. Cash-on-cash return adds financing back in. A 4.5% cap property can show negative cash-on-cash when levered at 75% LTV in a 7.5% rate environment.
Tourist development tax and Florida sales tax on short-term stays reduce effective rental income available for NOI. On $40,000 gross STR receipts in Osceola County at roughly 13% combined remittance, about $5,200 leaves before management and insurance. Omitting TDT inflates cap rate by 0.5-1.5 points.
Yes when both use the same NOI numerator and the same value denominator. Net yield is the landlord term; cap rate is the professional investor term. A Tampa townhome with $14,400 NOI on a $360,000 value shows 4.0% whether labeled cap rate or net yield.
Include property management, insurance (wind, landlord, HO-6, flood if owner-paid), non-homestead property tax, HOA, STR tax remittance, vacancy, turnover, utilities if owner-paid, and maintenance or capex reserves. Exclude mortgage, income tax, depreciation, and capital improvements that add basis.
Request trailing 12-month rent deposits or STR platform payouts, rebuild each operating line with binding insurance and county tax appraiser data, and subtract from gross. If the seller provides pro forma only, apply a 10-15% haircut to gross and use your own cost quotes before computing cap rate.
Get a cap rate worksheet for your Florida deal
Send a listing or address. We return NOI, cap rate, and sensitivity table with 2026 insurance and tax inputs within one business day.
Florida Estate publishes independent research, not legal or tax advice. Formulas and examples are illustrative. Verify cost inputs with licensed brokers, insurers, and CPAs before acquisition. For gross-to-net context see gross vs net yield Florida and the Florida rental yield guide.