Find a property's capitalization rate from its net operating income and price, or solve for the value or the NOI. The NOI is built up from rent, vacancy and expenses.
Estimates for planning, not financial, tax or legal advice. Figures use US rules unless the page says otherwise.
What this calculator does
The capitalization (cap) rate is a property's yearly net operating income divided by its value. It's the return you'd earn if you bought with cash, before financing and income tax. Appraisers use the same relationship, called direct capitalization, to value income property: value = income ÷ rate. Pick what you want to find and the other two are inputs.
How it's calculated
Effective gross income = gross rent × (1 − vacancy %) + other income
NOI = effective gross income − operating expenses
Cap rate = NOI ÷ value · Value = NOI ÷ cap rate · NOI = value × cap rate
Operating expenses are the costs of running the property: property tax, insurance, repairs, management, utilities the owner pays and reserves. Mortgage payments are not operating expenses, and neither is depreciation.
Worked example
A small building rents for $5,000 a month, or $60,000 a year. With 5% vacancy it collects $57,000. Operating expenses are $18,000, so NOI is $39,000.
Cap rate = 39,000 ÷ 600,000 = 6.50%
Value at a 6.5% cap rate = 39,000 ÷ 0.065 = $600,000
Value by NOI and cap rate
Small changes in cap rate move value a lot. This is the commercial property value math behind the table:
| NOI | 5% | 6% | 7% | 8% |
|---|
| $25,000 | $500,000 | $416,667 | $357,143 | $312,500 |
| $50,000 | $1,000,000 | $833,333 | $714,286 | $625,000 |
| $100,000 | $2,000,000 | $1,666,667 | $1,428,571 | $1,250,000 |
| $250,000 | $5,000,000 | $4,166,667 | $3,571,429 | $3,125,000 |
Limitations
- Cap rate is a one-year snapshot. It ignores financing, rent growth, big capital repairs and resale value.
- Use market cap rates from comparable sales in the same area and property type; there's no single "good" number.
- Seller-reported NOI often leaves out vacancy, management or reserves. Rebuild it from the rent roll and expenses.
Sources
How we checked this
Before every update, this calculator is run in a real browser with these known answers, and it must match all of them:
- $39,000 NOI on $600,000 = 6.5% cap rate ✓
- Same: NOI built up to $39,000.00 ✓
- Value at 6.5%: $600,000 ✓
- Commercial: $12,000/mo, 7% vacancy, $52,000 costs at 5.5% = $1,489,455 ✓
- NOI needed for $600,000 at 6.5%: $39,000, rent $5,000.00 ✓
- Expenses above income: no positive value ✓
Last checked October 26, 2026. Spotted something wrong? The math is done in your browser with the formula shown on this page, so you can check any result by hand.
Questions people ask
How do you calculate cap rate?
Divide the yearly net operating income by the property's price or value. $39,000 NOI on a $600,000 property is a 6.5% cap rate.
What is a good cap rate for a rental property?
It depends on the area, property type and risk. Lower cap rates usually mean higher prices relative to income in stable areas; higher cap rates mean more income per dollar but often more risk. Compare with recent sales nearby.
How do I value a commercial property with a cap rate?
Divide its NOI by the market cap rate: $100,000 NOI at a 7% cap rate is about $1,428,571. Choose Find value above.
Does cap rate include the mortgage?
No. NOI is before debt service, so cap rate measures the property, not your financing. For a return that includes the loan, use the cash-on-cash return calculator.
What's the difference between cap rate and ROI?
Cap rate is NOI ÷ value for one year. ROI can include financing, appreciation, loan paydown and selling costs over the whole holding period.