Cap Rate Calculator

Enter annual NOI and property value — or build NOI from rent, vacancy, and expenses.

All amounts are annual. Currency is fixed to USD.

Annual NOI (USD)

Net operating income for one full year. A negative NOI is allowed and shown as entered.

Annual Property Value / Purchase Price (USD)

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.

Each $1,000 annual NOI change moves cap rate by 0.10 percentage points. Verify NOI against a T-12 or operating statement.

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.

What does this number actually tell you?

Cap rate is annual NOI divided by property value — a quick yield check before you dig into financing.

Why it matters

It puts two properties on the same income-over-price scale, so you are not mixing an all-cash view with a financed one.

What goes wrong if you skip the check

A listing that ignores vacancy or expenses can look stronger than the property really is. Judging a loan deal with only cap rate hides debt pressure.

What you get when you use it right

A first-pass yield from operations alone — no mortgage math
A fair comparison when both sides use the same income definition
A clear stop sign: switch to cash-on-cash, DSCR, or full cash flow when the question changes

A capitalization rate, or cap rate, is that NOI ÷ value result as a percentage. It is an unlevered first-pass comparison for stable-income properties — not a financed return and not a buy or sell recommendation.

Read What Is Cap Rate?

How do I run the calculator?

Start with two annual figures. Or build NOI when you only have rent and expenses.

1
Enter annual NOI and property value
Use the current value or purchase price for the comparison you are testing. All amounts are annual USD.
2
Or build NOI from income and expenses
Open Build NOI from income and expenses when you still need to subtract vacancy and recurring operating costs.
3
Read the cap rate and the calculation bridge
The result updates as you type. Use the bridge to confirm how vacancy and expenses become NOI.
4
Leave this page when the next question changes
Financing, market context, or reverse valuation belongs on the linked tools and guides below — not inside this first-pass result.

Which numbers should I enter?

Keep every input annual and in USD. Mix monthly rent with an annual price and the result is noise.

Annual NOI: Income left after vacancy and recurring operating expenses for one year. Do not subtract financing costs or income taxes.
Property Value: The current market value or purchase price you are testing. Cap rate moves when this value moves.
Vacancy and Credit Loss: Rent you expect not to collect because space is empty or tenants do not pay. Detailed mode subtracts this before expenses.
Operating Expenses: Recurring costs to run the property: property tax, insurance, maintenance, management, and owner-paid utilities.

Where do people get this wrong?

Load either editable example only when you want to inspect its inputs in the calculator.

Why can't I just divide rent by price?

Example: $72,000.00 gross income, 5% vacancy, $21,360.00 operating expenses, and a $650,000.00 property value.

$72,000.00 gross income → −$3,600.00 vacancy loss → −$21,360.00 operating expenses → $47,040.00 NOI → 7.24% cap rate.

Incorrect shortcut: $72,000.00 ÷ $650,000.00 = 11.08%. That ignores vacancy and operating expenses — it is gross yield, not this scenario's cap rate.

Vacancy reduces collected income before recurring operating expenses reduce it again, leaving $47,040.00 annual NOI.
Replace these assumptions with the rent roll, T-12, and operating-expense records before relying on a result.
These are example assumptions, not a market benchmark.

Why does the same NOI show two different rates?

Example: annual NOI stays at $60,000.00 while the property value changes.

$60,000.00 ÷ $1,000,000.00 = 6.00%; $60,000.00 ÷ $1,200,000.00 = 5.00%.

The difference comes from the property-value denominator, not a change in NOI.
Keep the same income definition when comparing prices, values, and cap rates.
A higher or lower cap rate cannot tell you whether a deal is good by itself.

What counts inside NOI?

Analysts sometimes disagree on reserves. Pick one convention and stick to it when you compare 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

When should I stop trusting this result?

Cap rate is best suited to a stable-income property when income and expenses can be normalized.

Switch to a full cash-flow model instead when:

The property is still leasing up or vacant
A major renovation will change income soon
Income or occupancy is irregular

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.

What's my next question?

Pick the page that matches the question you have now — not every adjacent tool.

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.

Where do these conventions come from?

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.

Still stuck on a detail?

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.

Does mortgage or debt service belong in NOI?

No. Cap rate uses unlevered NOI, so mortgage principal and interest stay out of operating expenses. For a financed view, use the cash-on-cash or DSCR calculator next.

Why does my result differ from the listing cap rate?

Listings often omit vacancy, management, or maintenance, which inflates NOI and the stated cap rate. Rebuild NOI from the rent roll and operating records, then compare under the same expense convention.

What should I do with the cap rate after I calculate it?

Treat it as a first comparison only. Check financing with cash-on-cash or DSCR, compare against dated market data for a similar property type, and verify assumptions before acting.