Cap Rate Calculator
Use this Cap Rate Calculator with annual NOI and property value, or build NOI from rent, vacancy, and operating expenses.
All amounts are annual. Currency is fixed to USD.
Net operating income for one full year. A negative NOI is allowed and shown as entered.
Use the current property value or purchase price. This amount must be greater than $0.
Cap Rate
6.00%
6.00% means $6.00 of annual NOI per $100 of property value.
NOI here excludes mortgage and debt service, income tax, depreciation, and one-time capital costs.
This result describes the inputs only. It is not an investment rating.
Use consistent annual inputs
Annual NOI is income left after vacancy and recurring operating expenses. The property value is the current value or purchase price used for this comparison. Use annual USD amounts throughout.
- Annual NOI
- Effective gross income minus recurring operating expenses for one year. Do not subtract financing costs or income taxes.
- Property Value
- The current market value or purchase price being tested. Cap rate changes when this value changes.
- Vacancy and Credit Loss
- Expected rent not collected because space is vacant or tenants do not pay. The detailed mode subtracts this before expenses.
- Operating Expenses
- Recurring costs needed to operate the property, such as property tax, insurance, maintenance, management, and owner-paid utilities.
What this cap rate includes
NOI conventions can differ for reserves and normalized expenses. Keep the same convention when comparing properties.
| Included in NOI | Not included in NOI |
|---|---|
| Property tax and property insurance | Mortgage principal and interest |
| Recurring maintenance and property management | Income tax and depreciation |
| Owner-paid utilities and recurring operating costs | One-time capital improvements |
Use cap rate for a first comparison
Cap rate is best suited to a stable-income property when income and expenses can be normalized. Lease-up, major renovation, irregular income, or changing occupancy needs a complete cash-flow analysis instead.
Compare only against verifiable properties in a similar market, property type, lease structure, and condition. A cap rate alone does not tell you whether a deal is good.
Continue the task you actually have
Use a focused calculator or guide when your next question goes beyond this first-pass result.
NOI Calculator
Build annual NOI from income and operating expenses.
Property Value Calculator
Estimate value from NOI and a chosen cap rate.
Cash-on-Cash Calculator
Measure return after financing against cash invested.
DSCR Calculator
Compare NOI with annual debt service.
Cap Rate by City
Review dated market data before comparing results.
What Is Cap Rate?
Learn what the metric describes and where it fails.
What Is a Good Cap Rate?
Judge a result in market and property context.
Cap Rate vs Cash-on-Cash
Choose the metric that fits the financing question.
Sources and review date
Reviewed July 20, 2026
- FDICIncome capitalization discussion, including annual NOI divided by sale price and the limits of direct capitalization.
- OCCIncome approach guidance on supportable assumptions, property income, expenses, and capitalization.
- Freddie MacAppraisal guidance on developing capitalization rates and keeping NOI and cap-rate assumptions consistent.
For educational first-pass analysis only. This calculator is not an appraisal, investment, tax, accounting, or lending recommendation. Verify income, expenses, property condition, leases, and comparable sales with qualified professionals before acting.
Questions not answered above
Should replacement reserves be included in NOI?
Practice varies by property type and analysis purpose. State your convention and apply it consistently to both the subject property and comparable cap-rate evidence.
Should I use purchase price or current property value?
Use purchase price when screening a proposed acquisition. Use a supportable current value when reviewing an owned property. Label the basis so comparisons use the same meaning.
Can the cap rate be negative?
Yes. A negative NOI produces a negative cap rate. The calculator shows that result rather than replacing it with zero, because the loss is material to a first-pass review.