Enter NOI and price. See cap rate, plus implied value at 6% and 8% benchmarks.
A yield estimate, not an appraisal.
Cap rate equals annual net operating income divided by property price, expressed as a percentage: a $350,000 property producing $22,000 in annual NOI has a 6.3% cap rate, this site's own formula. Because it excludes financing entirely, cap rate lets you compare two properties bought with different loans, or no loan at all, on equal footing. The results panel above also runs the formula in reverse: given that same NOI, what price would the property need to sell at to hit a 6% or 8% market cap rate, two common benchmarks investors use to sanity-check an asking price before making an offer.
Cap rate ignores your loan on purpose. Once you have this number, run cash-on-cash to see what your financing does to it.
Cap rate is NOI divided by price: what the property would yield if bought with all cash. Because it strips out financing, you can compare two buildings on equal footing regardless of how either buyer is funding the purchase. Higher cap rates generally reflect higher risk, more management intensity or slower-growth markets. Lower cap rates tend to track stable, high-demand locations.
NOI excludes the mortgage. Get it right: rent minus taxes, insurance, maintenance, management and vacancy. Do that and cap rate becomes a clean yardstick across any two deals. Running it in reverse is useful too: divide your NOI by a target cap rate and you get the price at which the deal would hit that threshold, which is what the results panel shows above. For a read on whether your result is high, low or ordinary for where the property sits, see how it stacks up by market tier on the market-tier cap rate tool.
This calculator loads with $22,000 in annual NOI against a $350,000 price, the numbers behind the 6.3% figure in the walkthrough above. Holding NOI fixed, here is what that same income stream implies at three market cap rates.
| Cap rate | Implied property value |
|---|---|
| 6% (this deal's actual rate: 6.29%) | $350,000 |
| 6% target benchmark | $366,667 |
| 8% target benchmark | $275,000 |
The gap between the two benchmark rows is the spread a buyer targeting 8% would need to negotiate off the asking price, or the premium a seller pockets if buyers only require 6%.
Annual net operating income divided by the property price or current market value. It measures the all-cash yield, before any financing.
Typically 5 to 10 percent for most residential markets, though high-demand urban areas often run 4 to 5 percent. Higher cap rates tend to mean more risk, more management work or slower appreciation potential.
No. That is precisely the point. Cap rate strips out financing so you can compare properties regardless of how they are purchased.
No. It is a planning estimate. Verify all inputs against local market data before making any investment decision.