Cap Rate Calculator
Calculate capitalization rate, property value, or NOI based on any two known variables.
Capitalisation rate is net operating income divided by value. Because the relationship has three variables, knowing any two gives you the third — which is how cap rates are used to value an asset, back into a price, or sanity-check a broker's number.
Annual NOI after operating expenses
Purchase price or current market value
For per-unit metrics
Enter your inputs and click "Run the Numbers" to see results.
The formula
Cap Rate = Net Operating Income / Property Value Property Value = Net Operating Income / Cap Rate
What to watch
- A cap rate is only meaningful against a comparable NOI definition. Whether a management fee and replacement reserve are deducted changes the rate materially, and not everyone quotes it the same way.
- Going-in cap rate uses current NOI; exit or terminal cap rate uses projected NOI at sale. Underwriting the same rate at both ends assumes no change in market pricing over your hold.
- Small movements matter a lot. Because value is NOI divided by the rate, a modest change in the rate produces a large change in value — which is why exit cap assumptions deserve sensitivity analysis.
- Gross rent multiplier ignores operating expenses entirely, so it is a screening shortcut rather than a valuation method.
Frequently asked questions
What does a higher cap rate mean?
A higher cap rate means a lower value for the same income, and generally reflects greater perceived risk or weaker growth expectations. Lower cap rates indicate buyers will pay more per dollar of income, typically for lower-risk assets or stronger markets.
Should NOI include a reserve for replacements?
Lenders and most institutional buyers deduct one. Brokers frequently do not. Since the deduction lowers NOI and therefore the implied value at a given cap rate, always confirm which definition a quoted cap rate uses before comparing it to anything.
Go deeper
How Lenders Size Your Loan: DSCR, Debt Yield, and LTV
Three constraints determine your loan proceeds, and only one of them binds. Knowing which one — before you go to market — is the difference between a realistic raise and a wasted month.
Read the articleThis calculator produces estimates from the assumptions you enter. It is not investment, tax, or legal advice, and actual lender terms, pricing, and outcomes will differ. Confirm anything you intend to rely on with advisers engaged on your specific facts.
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