Cap Rate Calculator
Last updated: August 2026
Cap rate is net operating income divided by price. The division is trivial; the whole difficulty is what belongs in NOI, which is why the same property routinely produces two very different figures. Use the full calculator below to build it properly.
Quick cap rate calculation
If you already know the net operating income, this is the whole formula.
There is no universally good cap rate. Compare it against recent sales of similar properties in the same submarket, not a national benchmark.
Cap rate lookup chart
Purchase price across the top, annual net operating income down the side.
| NOI ↓ / Price → | $150k | $200k | $250k | $300k | $400k | $500k | $750k | $1M |
|---|---|---|---|---|---|---|---|---|
| $9k | 6.0% | 4.5% | 3.6% | 3.0% | 2.3% | 1.8% | 1.2% | 0.9% |
| $12k | 8.0% | 6.0% | 4.8% | 4.0% | 3.0% | 2.4% | 1.6% | 1.2% |
| $15k | 10.0% | 7.5% | 6.0% | 5.0% | 3.8% | 3.0% | 2.0% | 1.5% |
| $18k | 12.0% | 9.0% | 7.2% | 6.0% | 4.5% | 3.6% | 2.4% | 1.8% |
| $21k | 14.0% | 10.5% | 8.4% | 7.0% | 5.3% | 4.2% | 2.8% | 2.1% |
| $25k | 16.7% | 12.5% | 10.0% | 8.3% | 6.3% | 5.0% | 3.3% | 2.5% |
| $35k | 23.3% | 17.5% | 14.0% | 11.7% | 8.8% | 7.0% | 4.7% | 3.5% |
| $50k | 33.3% | 25.0% | 20.0% | 16.7% | 12.5% | 10.0% | 6.7% | 5.0% |
Shading is a rough guide, not a verdict. An 8% cap in a declining submarket with a roof at end of life is a worse investment than a 5% cap in a growing one. The market sets these rates for reasons.
Full calculator: building NOI properly
This is where cap rates go wrong. A seller can use market rent rather than collected rent, omit a vacancy allowance, exclude management because they self-manage, and understate maintenance — and the headline moves several points with nothing about the building changing.
- Gross scheduled income
- $33,600
- Less vacancy
- −$2,016
- Collected income
- $31,584
- Management
- −$2,843
- Total operating expenses
- −$13,543
- Net operating income
- $18,041
Estimates only. Build expenses from real quotes and the actual tax bill rather than percentages.
The three-numbers problem
The same property, as the seller presents it and as you should compute it:
| Line | Seller's version | Yours |
|---|---|---|
| Gross annual rent | $36,000 market | $33,600 collected |
| Vacancy allowance | $0 | −$2,016 |
| Property tax | −$4,200 | −$4,800 non-homestead |
| Insurance | −$1,100 | −$1,600 real quote |
| Management | $0 self-managed | −$3,024 |
| Maintenance | −$1,800 | −$3,400 old stock |
| NOI | $26,900 | $18,760 |
| At $300,000 | 9.0% cap | 6.3% cap |
Nothing about the building changed. Two expense lines are simply absent from the first column and three are understated, and the headline moves by nearly three points. This is why “what is a good cap rate” is unanswerable in the abstract.
Valuing a property from its income
The formula runs both ways. Value = NOI ÷ cap rate. If comparable buildings trade at 7% and a property produces $28,000 of NOI, the market is saying it is worth about $400,000 — which also means every dollar of additional NOI creates roughly fourteen dollars of value.
This works where the market prices on income — commercial and larger multifamily. Single-family houses are priced against owner-occupied comparable sales, so raising NOI does not translate into value the same way. And the cap rate itself moves: value created by raising NOI can be erased by cap rates expanding.
What moves a market's cap rates
| Higher cap rates | Lower cap rates |
|---|---|
| Declining or flat population | Growth |
| Older housing stock | Newer construction |
| Concentrated employment | Diversified economy |
| Thin buyer pool | Deep, liquid market |
| High tenant turnover | Stable, long tenancies |
| Landlord-unfriendly law | Faster, cheaper enforcement |
| Heavy property tax burden | Lower effective rates |
Cap rate compression and expansion
The number most owners treat as fixed, and which moves more than rents do. A property with $28,000 of NOI:
| Market cap rate | Implied value |
|---|---|
| 5% | $560,000 |
| 6% | $466,700 |
| 7% | $400,000 |
| 8% | $350,000 |
A move from 6% to 7% removes $66,700 of value with nothing changing about the building. Rent growth of 3% a year would take four years to offset it — which is the risk in buying at a compressed cap rate, and the reason the rate you buy at matters more to eventual returns than most buyers focused on monthly cash flow appreciate.