Cap Rate Calculator
A property with $120,000 in annual NOI and a $1,750,000 value has a 6.86% cap rate. Enter annual net operating income and property value to calculate cap rate, or switch modes to estimate value from NOI and a target cap rate. This calculator gives you a fast first-pass view of an income property before financing, taxes, and appreciation enter the picture.
Quick answer
Cap rate equals annual net operating income divided by property value.
What this tells you
- •Cap rate equals annual net operating income divided by property value.
- •NOI means property income after routine operating expenses, but before mortgage payments, income taxes, depreciation, and capital gains.
- •Reverse mode uses a target cap rate to estimate what purchase price lines up with a property's income.
How to Use
- 1Choose whether you want to calculate cap rate or property value.
- 2Enter the annual NOI, not a monthly figure.
- 3For cap rate mode, enter the current or expected property value.
- 4For property value mode, enter the target cap rate you want to use for underwriting or comparison.
- 5Calculate to see the implied cap rate or estimated value on the same annual NOI assumption.
How It Works
Formula
Cap Rate = (Annual NOI / Property Value) x 100
Property Value = Annual NOI / (Target Cap Rate / 100)The calculator divides annual NOI by property value and converts the result to a percent. In reverse mode it converts the target cap rate into decimal form, then divides annual NOI by that rate to estimate value. It assumes the NOI is annual and already net of normal operating expenses.
Calculation note: values are processed in the order shown above, using the current input units.
Worked Examples
$120,000 NOI on a $1,750,000 property
Divide $120,000 by $1,750,000, then multiply by 100. The result is a 6.86% cap rate, which gives you a quick yield snapshot for that purchase price.
$95,000 NOI at a 5.50% target cap rate
Convert 5.50% to 0.055, then divide $95,000 by 0.055. That gives an estimated property value of $1,727,272.73 at the chosen cap rate.
Estimated Property Value on $100,000 Annual NOI
A quick lookup that shows how the same NOI supports a different value as the market cap rate changes.
| Cap Rate | Estimated Property Value |
|---|---|
| 4.00% | $2,500,000 |
| 5.00% | $2,000,000 |
| 6.00% | $1,666,667 |
| 7.00% | $1,428,571 |
| 8.00% | $1,250,000 |
Lower cap rates imply higher values for the same NOI. Local risk, growth expectations, lease terms, and property condition still matter.
Common mistakes
- Using gross scheduled rent instead of NOI after vacancy and operating expenses
- Entering one month of NOI against a full property value instead of annualizing the income
- Comparing cap rates across very different markets, lease structures, or property classes as if they mean the same risk
- Treating cap rate as the full investor return even though debt, taxes, capital expenditures, and appreciation sit outside this simple ratio