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Cap Rate Calculator

Determine the capitalization rate for property valuation.

Parcel Platform
Mar 4, 2026
Cap Rate Calculator
Purchase $300,000 • Rent $2,500/mo
Annual NOI
$17,700
Cap Rate
5.9%
Value at Target Cap
$252,857
Annual Gross Income
$30,000
Advanced: income + expense breakdown

Annual Operating Expenses is treated as a single number. Switch to “Monthly breakdown” for a more detailed estimate.

What is Cap Rate?

Cap rate (capitalization rate) is a real estate metric that measures the rate of return on an investment property based on the income it generates, independent of financing. It helps investors compare properties and assess risk-adjusted returns.

Formula
Cap Rate = Net Operating Income (NOI) ÷ Property Value × 100%

How this calculator works

Cap rate is NOI divided by purchase price (or value). It's most useful for comparing unlevered income returns across similar assets and markets.

What it includes
  • NOI estimate
  • Cap rate
  • Value at target cap rate
How to use it
  1. Estimate stabilized NOI (rent minus operating expenses, excluding debt).
  2. Compute cap rate to compare to local comps and typical market cap rates.
  3. Use the target-cap section to translate NOI into a valuation range.

FAQ

Is cap rate meaningful on a heavily value-add deal?
Use stabilized NOI (post-renovation) and compare to stabilized pricing. For heavy rehab, cap rate during construction isn’t very informative.
Should I use purchase price or current value?
Use purchase price when comparing your acquisition return. Use current value (or appraisal) when comparing to market pricing or considering a sale.
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