Money
Cap Rate Calculator
Choose whether to compute the cap rate from a property's price or back into property value from NOI and a target cap rate. Enter gross income, vacancy allowance, and operating expenses; the calculator returns NOI and the cap rate.
e.g. 400,000
Total rent and other property income at full occupancy. · e.g. 48,000
Expected vacancy and collection loss. · e.g. 5
Taxes, insurance, management, repairs, utilities you pay. · e.g. 12,000
What NOI excludes
Net operating income does not include mortgage payments, depreciation, income tax, or capital expenditures. Debt service is a financing decision, not an operating one. Cap rate is a property-level yield; cash-on-cash return is the leveraged yield.
Educational tool only. Not real estate, investment, tax, or legal advice.
Capitalization rate
8.4%
NOI $33,600.00 on a $400,000.00 property
Cap rate is NOI divided by property value. A higher cap rate usually signals more perceived risk or a higher-yield market; lower cap rates show up in stable, in-demand locations.
Examples
$400,000 property · $48,000 gross · 5% vac · $12,000 exp
NOI $33,600 · cap 8.40%
$1.2M property · $120,000 gross · 7% vac · $35,000 exp
NOI $76,600 · cap 6.38%
Target 7% cap · $48,000 gross · 5% vac · $12,000 exp
Value ≈ $480,000
$250,000 property · $24,000 gross · 8% vac · $6,000 exp
NOI $16,080 · cap 6.43%
How it works
Cap rate is a property-level yield. The calculator builds NOI from gross income, vacancy, and operating expenses, then divides by property value (or solves for property value given a target cap).
Effective income · gross_income × (1 − vacancy%)
NOI · effective_income − operating_expenses
Cap rate · NOI / property_value × 100
Implied value · NOI / target_cap_rate%
NOI excludes debt service, depreciation, income tax, and capital expenditures by definition.
Related money calculators
- Mortgage calculator for the financing side that NOI excludes.
- Rent vs buy calculator for the personal-use property decision.
- Net worth calculator to fold property equity into a wider balance sheet.
- Break even calculator for fixed-cost / variable-cost analysis on a property.
- All money calculators.
Disclaimer. Cap rate is a single, unleveraged metric. It is not a complete valuation or underwriting model and does not capture financing, depreciation, taxes, location risk, capital expenditures, or growth assumptions. Not real estate investment, tax, or legal advice.
Frequently asked questions
The capitalization rate is the unleveraged annual yield on an investment property: net operating income divided by property value, expressed as a percent. A $400,000 property earning $28,000 of NOI has a 7% cap rate. Cap rate is the standard property-level yield metric in commercial and multifamily real estate.
Cap rate = NOI / property value × 100. Net operating income is gross rental income minus vacancy and minus operating expenses (taxes, insurance, management, repairs, utilities you pay). Mortgage payments are not in NOI; cap rate is the property's yield before financing.
Include: rental income, parking, laundry, and other property revenue, minus vacancy, property tax, insurance, management, repairs and maintenance, utilities the owner covers, and reserves. Exclude: mortgage principal and interest, depreciation, income tax, and capital improvements. Treating debt service as an operating expense is the most common cap-rate mistake.
It depends on market and property type. Prime urban multifamily often trades at 4 to 6%. Stable Class B markets sit around 6 to 8%. Tertiary markets, value-add, and higher-risk property types can be 8 to 12% or more. Higher cap rate means more current yield but usually more risk or work; lower cap rate means less yield but stronger appreciation prospects.
Cap rate is unleveraged (NOI on full property value). Cash-on-cash return is leveraged (annual cash flow after mortgage on the cash you actually invested). The same property can have a 7% cap rate and a 12% cash-on-cash return if it is financed at favorable terms, or a 7% cap rate and a -2% cash-on-cash if the mortgage is expensive.
Effective. NOI starts from effective gross income, which is gross rent minus vacancy and collection loss. Using full gross rent overstates NOI and the cap rate. Use a realistic vacancy assumption for the area (often 5 to 10% for stabilized residential).
Yes. If you know the NOI and the prevailing cap rate for similar properties in the area, divide NOI by the cap rate to back into a value. That is what the 'Property value from NOI + target cap' mode does. Use cap rates from recent comparable sales, not asking-price cap rates.
No. The cap rate calculator is an educational tool for property-level yield. It does not include financing, taxes, depreciation, market trends, or appraisal-level adjustments. Talk to a qualified real estate, tax, and legal professional before buying property.
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