Cap Rate CalculatorCapitalization rate, property value and NOI for real estate
Solve for any side of the cap rate formula — cap rate, property value or the NOI you need — build net operating income from rent and expenses, and see exactly how much a property’s value moves when cap rates rise or fall.
By Manzoor Ahmad · 13+ years of web development & SEO experienceLast updated: October 19, 2026
Capitalization rate
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How value moves when cap rates change
Same NOI, different market cap rates.
From gross rent to NOI
Cap rate sensitivity
| Cap rate | Property value | Change vs. now | NOI needed at this price |
|---|
What is a cap rate? The capitalization rate is a property’s net operating income (NOI) divided by its current market value or purchase price, shown as a percentage. It is the annual return the property would produce if you bought it with all cash. For example, a $500,000 rental that nets $30,000 a year after operating expenses has a cap rate of 6.0%. Higher cap rates mean more income per dollar invested — and usually more risk.
How to Use the Cap Rate Calculator
- Choose what to solve forTap a corner of the triangle: Cap rate to grade a listing, Value to price a property at a market cap rate, or NOI to see the income a price requires.
- Build or enter your NOIStart from monthly rent, subtract vacancy and every operating expense — or switch to “I know my NOI” if you already have an operating statement.
- Read the spectrum and tilesSee where the result sits from core to opportunistic, plus expense ratio, gross rent multiplier, price per unit and the spread over a benchmark yield.
- Stress-test the priceUse the curve and sensitivity table to see how much value you’d gain or lose if market cap rates move by half a point or more.
Cap Rate Formula (and Its Two Rearrangements)
The capitalization rate formula links three numbers. Know any two and you can find the third — which is exactly what the triangle in the calculator does.
Cap rate: Cap rate = NOI ÷ property value × 100
Property value: Value = NOI ÷ cap rate
Required NOI: NOI = value × cap rate
Worked example: a $500,000 fourplex
- Gross rent: $4,200 × 12 = $50,400
- Less 5% vacancy → effective income $47,880
- Operating expenses: tax $6,000, insurance $2,400, management 8% ($3,830), maintenance 5% ($2,394), utilities $1,200, reserves $2,000 = $17,824
- NOI: $47,880 − $17,824 = $30,056
- Cap rate: $30,056 ÷ $500,000 = 6.01%
Using cap rate to price a property
Appraisers call this the direct capitalization method of the income approach. If similar fourplexes nearby sell at a 6.5% cap rate, the same $30,056 NOI supports a value of $30,056 ÷ 0.065 = $462,394.
At a 5.5% market cap rate it would support $546,465. That $84,000 swing from a one-point difference is why choosing the right comparable cap rate matters more than any other input.
What Goes Into NOI for a Cap Rate Calculation
Most cap rate mistakes are really NOI mistakes. Net operating income includes every cost of running the property, but none of the costs of financing it or the owner’s taxes.
| Item | Include in NOI? | Why |
|---|---|---|
| Rent, parking, laundry, storage, fees | Yes — income | All recurring property income counts |
| Vacancy and credit loss | Yes — deduct | Buildings are rarely 100% occupied all year |
| Property tax and insurance | Yes — expense | Unavoidable costs of owning the asset |
| Management, repairs, utilities, HOA | Yes — expense | Day-to-day operating costs; include management even if you self-manage |
| Replacement reserves (CapEx) | Usually | Most investors and lenders deduct reserves; some brokers leave them out, which inflates cap rate |
| Mortgage principal and interest | No | Cap rate is financing-neutral; use cash-on-cash return for leveraged returns |
| Depreciation and income tax | No | These depend on the owner, not the property |
| One-time renovations | No | Capital improvements are not recurring operating costs |
What Is a Good Cap Rate?
There’s no universal “good” cap rate. A cap rate prices risk: investors accept low cap rates for safe, high-demand assets and demand higher ones for older buildings, weaker locations or shorter leases. Compare a property only against recent sales of the same type, class and market.
| Property type | Example stabilized cap rates (CBRE, H2 2025) | Direction in H1 2026 |
|---|---|---|
| Multifamily, Class A | 4.5%–5% (New York City, Atlanta suburban); 4.5%–4.75% (Boston infill) | Mixed; NYC stabilized widened to 5%–5.5% |
| Industrial | 5%–5.5% Class A, 5.5%–6% Class B (Dallas, Atlanta) | Compressing |
| Neighborhood retail, Class A | 5.5%–6.25% (Atlanta); 5.5%–6% (Denver) | Compressing |
| Hotel, full-service luxury | 6%–6.5% (Atlanta) | Compressing |
| Office, Class A | 7%–7.5% downtown, 8%–9% suburban (Boston) | Mostly widening; suburban Chicago 10%–12.5% |
Examples from CBRE’s U.S. Cap Rate Survey (H2 2025) and coverage of its H1 2026 edition, which put the all-property average near 6.6%. Small residential rentals often trade at different rates than institutional assets — use local sales comps for your market.
A lower cap rate usually means
- Strong, high-demand location
- Newer building, creditworthy tenants or long leases
- Lower risk — and a higher price per dollar of income
- More of the return expected from appreciation
A higher cap rate usually means
- Smaller or slower-growing market
- Older building, deferred maintenance or vacancy
- Higher risk — or a genuine bargain worth checking
- More of the return coming from current income
Cap Rates, Interest Rates and Property Values
Because value = NOI ÷ cap rate, small moves in cap rates create large moves in value. When interest rates rise, investors usually demand higher cap rates to keep a risk premium over safer investments such as 10-year Treasuries — called cap rate expansion — and values fall even if rents don’t change. When rates fall, cap rates tend to compress and values rise.
| Cap rate | Value of $100,000 NOI | Change from 5% |
|---|---|---|
| 4.0% | $2,500,000 | +25.0% |
| 4.5% | $2,222,222 | +11.1% |
| 5.0% | $2,000,000 | — |
| 5.5% | $1,818,182 | −9.1% |
| 6.0% | $1,666,667 | −16.7% |
| 7.0% | $1,428,571 | −28.6% |
| 8.0% | $1,250,000 | −37.5% |
| 10.0% | $1,000,000 | −50.0% |
The asymmetry most investors miss: the same one-point move hurts more at low cap rates. Going from 4% to 5% cuts value by 20%, while going from 9% to 10% cuts it by only 10%. Low-cap-rate properties are therefore far more sensitive to interest rates — the curve in the calculator shows this bend for your own NOI.
Cap Rate vs. Cash-on-Cash Return, ROI and Other Metrics
Cap rate is one lens. Each metric below answers a different question about the same deal, and serious investors read several together.
| Metric | Formula | Answers | Includes financing? |
|---|---|---|---|
| Cap rate | NOI ÷ value | What does the property earn on its price? | No |
| Cash-on-cash return | Annual cash flow ÷ cash invested | What do I earn on the cash I put in? | Yes |
| Gross rent multiplier | Price ÷ gross annual rent | Quick screen before expenses are known | No |
| Rental yield | Annual rent ÷ price | Headline income return (gross or net) | No |
| DSCR | NOI ÷ annual debt service | Can the rent cover the loan? | Yes |
| IRR / total ROI | Return over the full hold incl. sale | What did the whole investment earn? | Usually |
Cap Rate Mistakes That Make Bad Deals Look Good
- Trusting a “pro forma” cap rate. Listing cap rates often use projected rents and optimistic expenses. Rebuild NOI from the actual rent roll and trailing 12-month statements.
- Leaving out vacancy or reserves. Dropping a 5% vacancy factor and reserves can lift a cap rate by a full point.
- Skipping management because you self-manage. Your time has a cost, and the next buyer will deduct it.
- Using next year’s tax bill wrong. A sale can trigger reassessment, so the buyer’s property tax may be much higher than the seller’s.
- Comparing across property types. A 7% office and a 7% apartment cap rate describe very different risks.
- Including the mortgage. Debt payments belong in cash-on-cash and DSCR, never in NOI.
Next Steps in Analyzing a Rental Deal
Cap rate tells you what the property earns. These tools in the same rental-investing toolkit tell you what you earn, whether a lender will finance it, and how it performs over time. If you’re comparing replacement properties for a like-kind exchange, the 1031 exchange calculator shows how much tax the swap defers.
Cap Rate Calculator FAQs
Divide the property’s annual net operating income by its current value or purchase price, then multiply by 100. A property with $30,000 of NOI priced at $500,000 has a cap rate of $30,000 ÷ $500,000 × 100 = 6.0%.
It depends on the market and property type. Stabilized Class A apartments in major U.S. metros recently traded around 4.5%–5.5%, while older buildings and smaller markets trade higher. A good cap rate is one in line with — or better than — recent sales of comparable properties in the same area, with NOI you’ve verified yourself.
Neither is automatically better. A higher cap rate means more income per dollar invested but usually more risk or less expected growth. A lower cap rate means you pay more for each dollar of income, typically for a safer, higher-demand property. Buyers want higher cap rates; sellers want lower ones.
No. Cap rate is calculated as if you paid all cash, so it lets you compare properties regardless of how they’re financed. To measure returns after mortgage payments, use cash-on-cash return or DSCR.
Divide NOI by the market cap rate as a decimal. $30,000 of NOI at a 6.5% cap rate gives $30,000 ÷ 0.065 = $461,538 — about $462,000. Choose “Value” in the calculator’s triangle to do this automatically.
Use the purchase price when evaluating a deal you’re buying, and current market value when assessing a property you already own or comparing it with others. A property bought years ago will show an inflated cap rate if you divide by its old purchase price.
Cap rate measures the property’s unleveraged return: NOI ÷ value. Cash-on-cash return measures your leveraged return: annual cash flow after the mortgage ÷ the cash you invested. Good financing can make cash-on-cash higher than the cap rate; expensive debt can push it lower.
Investors want real estate to pay a premium over safer alternatives such as Treasuries, and higher rates also raise borrowing costs. Both push buyers to demand more income per dollar paid, so cap rates expand and prices fall unless NOI grows.
It’s the difference between a property’s cap rate and a benchmark yield, usually the 10-year Treasury. A 6.0% cap rate against a 4.25% Treasury yield is a 1.75-point spread — the extra return for taking on property risk. Enter a benchmark in the calculator to see your spread.
Yes, if operating expenses exceed income, NOI is negative and so is the cap rate. That signals a property losing money before any mortgage payment — common with heavy vacancy or a building in need of repositioning.
No. The 1% rule compares monthly gross rent with price and ignores expenses. Cap rate uses NOI after expenses. A property meeting the 1% rule with a typical 40%–50% expense ratio usually lands somewhere around a 6%–7% cap rate.
Yes. It is free, needs no sign-up and runs entirely in your browser. Your prices, rents and expenses are not sent to DexoCalc or stored.
Manzoor Ahmad
13+ years of web development & SEO experience · Founder, DexoCalc
Manzoor builds and maintains every DexoCalc calculator, including the full mortgage and rental-investing libraries. This tool follows the direct capitalization method used in income-property appraisal and references current institutional cap rate survey data so the benchmarks reflect today’s market.
Sources
Results are estimates for education and planning, not investment, appraisal or tax advice. Cap rates vary by market, asset class and timing — verify NOI with actual operating statements and compare against local sales comparables before making an offer.