What is cap rate?
Cap rate is annual net operating income divided by property value. It is a property-level yield measure before mortgage payments and income taxes.
US · USDTransparent educational estimate
Cap Rate Calculator
Estimate net operating income and property-level yield from annual rent, vacancy, expenses, and value. Add optional targets to test implied value or the NOI needed for a valuation.
What this baseline models
- Annual USD income and expenses
- NOI before financing and income taxes
- Optional target cap-rate valuation
- Gross-rent sensitivity
Public calculator · no account required
Model property yield
Model property yield
All income, vacancy, and expense assumptions are annual USD amounts. Target fields are optional.
Cap rate
7.40%
NOI divided by property value; debt service excluded
Net operating income
$22,200
Annual income after vacancy and operating expenses
Implied property value
$317,143
Current NOI divided by the optional target cap rate
Required NOI
$22,750
NOI needed for the optional target value and cap rate
Cap rate detail
Core property-level yield and optional target-value outputs.
- Net operating income
- $22,200
- Cap rate
- 7.40%
- Implied property value
- $317,143
- Required NOI at target value
- $22,750
Keep this analysis
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Assumption checks
Deterministic checks based only on this scenario's inputs and outputs.
Debt service is excluded
Cap rate is based on NOI before mortgage payments, income taxes, depreciation, and financing costs.
Rent sensitivity
Each row reruns the same formula engine while changing gross annual rent by ±5% and ±10%.
Gross-rent sensitivity details
| Rent change | Gross annual rent | NOI | Cap rate |
|---|---|---|---|
| -10.00% | $32,400 | $18,600 | 6.20% |
| -5.00% | $34,200 | $20,400 | 6.80% |
| Base | $36,000 | $22,200 | 7.40% |
| +5.00% | $37,800 | $24,000 | 8.00% |
| +10.00% | $39,600 | $25,800 | 8.60% |
Formula reference
Every output is explainable
Money is displayed in USD and rates are entered as percentages where applicable. Formula version cap-rate@1.0.0 stays attached to the result.
Net operating income (NOI)
Gross annual rent − annual vacancy allowance − annual operating expenses
Annual property income after modeled vacancy and operating costs but before debt service, income taxes, and depreciation.
Cap rate
NOI ÷ property value
A property-level yield based on the entered value. Mortgage payments and other financing costs are excluded.
Implied property value
NOI ÷ target cap rate
The value implied by the current NOI at an optional positive target cap rate.
Required NOI
Target property value × target cap rate
The NOI required to support an optional target value at the selected target cap rate.
Example scenario
A $300,000 income property
The default scenario uses a $300,000 property, $36,000 gross annual rent, a $1,800 vacancy allowance, and $12,000 in annual operating expenses. The 7% target is an editable illustration, not a market benchmark.
Open the example in the calculatorProperty value
$300,000
Gross annual rent
$36,000
Net operating income
$22,200
Calculated cap rate
7.40%
FAQ
Common questions
Does cap rate include debt service?
No. Mortgage principal, interest, points, and other financing costs are excluded from NOI and cap rate. Use Rental ROI or Cash-on-Cash Return to examine financing effects.
How does the target cap rate affect implied value?
The calculator divides current NOI by the target cap rate. A lower target cap rate implies a higher value when NOI is unchanged, and a higher target implies a lower value.
What belongs in annual operating expenses?
Use recurring property operating costs such as taxes, insurance, maintenance, management, utilities, and reserves. Keep mortgage payments and income taxes separate.
Related calculators
Compare this result with another view of income, financing, or project returns. Each calculator uses its own transparent assumptions.