Cap Rate Calculator
The cap rate is a property's net operating income divided by its price. Enter the rent, vacancy and operating expenses to get NOI, then the price to get the cap rate. Add the cap rate the market pays to see what the property is worth.
Inputs
Results
- Effective gross income
- $1,140,000
- Net operating income
- $720,000
- Cap rate on the price
- 6.00%
- Value at the market cap rate
- $13,090,909
How it's calculated
| Result | Formula |
|---|---|
| Effective gross income | =Rent × (1 − vacancy) |
| Net operating income | =EGI − operating expenses |
| Cap rate on the price | =NOI / purchase price |
| Value at the market cap rate | =NOI / market cap rate |
A lower cap rate means a higher price for the same income: buyers accept a lower yield for safer or more desirable assets. Value and cap rate move in opposite directions.
If the property is worth more at the market cap rate than its price, you're buying below what similar income trades for. Use stabilized NOI, not a single strong month.
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How do you calculate a cap rate?
Cap rate = net operating income ÷ property value (or price). NOI is rent after vacancy minus operating expenses, before debt service and capital expenditures.
What is a good cap rate?
There isn't one number. Prime multifamily and industrial often trade around 4 to 6%; riskier assets and markets trade higher. A higher cap rate means more income for the price, and usually more risk.
Does NOI include the mortgage?
No. NOI is before debt service, so the cap rate describes the property, not the financing. Debt shows up in cash-on-cash return and DSCR.
What's the difference between going-in and exit cap rate?
The going-in cap rate uses today's price and NOI; the exit cap rate is the one you assume at sale. Underwriters usually set the exit cap a little higher to stay conservative.