Cap Rate Calculator
Compare income properties on a like-for-like basis.
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Cap Rate Calculator by TheCalcTools
How the Cap Rate Calculator works
Enter the property’s annual net operating income (rent less operating expenses, before debt service) and its price.
The cap rate is NOI divided by price.
Dividing NOI by a target cap rate shows the value an investor would pay.
The formula
Worked example
Using the default values shown in the calculator:
| Net operating income (annual) | $24000 |
|---|---|
| Property price or value | $400000 |
| Target cap rate (%) | 7 % |
- Cap rate = $24,000 ÷ $400,000 = 6.00%.
- At a 7% target the property would be worth $342,857, which is -$57,143 compared with the asking price.
Result:
| Cap rate | 6.00% |
|---|---|
| Value at target cap rate | $342,857 |
| Difference from asking price | -$57,143 |
Frequently asked questions
What is NOI?
Net operating income: rental income minus operating expenses such as taxes, insurance, repairs and management. It excludes mortgage payments and income tax.
What does a higher cap rate mean?
More income per dollar of price, usually with more risk, such as a weaker location or tenant.
Sources and further reading
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This calculator gives estimates for information only. It is not financial advice, and your lender's or provider's figures will govern. Rates, fees and rules vary. See our disclaimer.