Cap Rate Calculator
A cap rate calculator divides NOI by price. This page also solves the two rearrangements: the price a target cap rate supports, and the income a price must produce. If you still need to build that income from rent and expenses, do that on the NOI calculator first, then come back with the number.
Cap rate
Inputs persist in the URL for sharing. If you do not have NOI yet, build it from rent and expenses in the NOI calculator, then bring that income back here.
How do you calculate cap rate from NOI and price?
Divide annual NOI by the purchase price, then multiply by 100. A new-build Taco Bell asks $2,410,000 with $140,985 of NOI: 140,985 ÷ 2,410,000 = a 5.85% cap. Flip it: if your yield floor is 6.25%, that income justifies $2,255,760 — your counter has a number behind it. Or hold price constant: at $2.41M, a 6.25% yield needs $150,625 of NOI, which the schedule of 2% annual bumps reaches early in year 4. Suddenly the negotiation is about time, not just price — that's the reverse solver earning its keep.
Where does the income in a cap rate come from?
From the lease, not from this page. Rent, vacancy, reimbursements, and the expenses the landlord still pays belong in the NOI calculator. Paste that income in here. A cap rate is only as honest as the income on top of the fraction.
When is a higher cap rate actually the worse deal?
A 6.5% NN deal with a looming roof can net worse than a 6.0% absolute-net deal next door. Cap rates only compare like to like: same credit tier, similar term, same structure. Pair this tool with the value calculator and the tenant pages' cap ranges, then let comps — not averages — set your number.
What should you check before you trust a cap rate calculator result?
Match the annual NOI field to contract rent minus costs the lease leaves with the landlord. A flyer that uses next year's bump, drops a management fee, or quotes the cap on price after credits will not match this page. When that income still has to be built from rent, vacancy, and reimbursements, do it in the NOI calculator and paste the result into the annual NOI field here.
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What formula does this cap rate calculator use?
This cap rate calculator divides net operating income by purchase price, then multiplies by 100. The same equation solves price from NOI and a target cap rate, and the income a price must produce. Enter in-place NOI from the lease, not a pro-forma flyer number, and compare the result only with deals of similar credit, term, and lease structure.
What is a cap rate calculator?
A cap rate calculator divides one year of net operating income by the purchase price and shows the result as a percentage: NOI ÷ price × 100. Use in-place income from the lease, not a pro-forma flyer. This page also rearranges that equation to solve for price or for the income a price must produce. Building the income from rent, vacancy, and expenses is a separate step.
What formula does the cap rate calculator use?
Capitalization rate = net operating income ÷ purchase price × 100. It also solves the rearrangements: price = NOI ÷ cap (what should I pay for this income at my required yield?) and NOI = price × cap (what income must this price produce to hit my target?). Three views of one equation — pick the one matching the unknown in your deal.
Is the cap rate the same as my return on investment?
Only if you pay cash and nothing ever changes. Cap rate is the unlevered year-one yield: it ignores financing (leverage raises or ruins returns), rent escalations (a 2%-bumps lease outearns its going-in cap over time), and exit price. Think of it as the market's price tag for a risk profile — the start of return math, not the end. Cash-on-cash and IRR pick up where it stops.
What NOI should I plug in — actual, pro forma, or the flyer number?
In-place, verifiable NOI: current contract rent minus any landlord expenses the lease actually leaves you (management, reserves, non-reimbursed items). Flyer NOI often quietly assumes future escalations, expense caps that don't exist, or vacancy at zero forever. On absolute-net deals NOI ≈ rent, which is the structure's charm; on anything NN, subtract honestly or your cap rate is fiction.
Which number should I solve for in the cap rate calculator?
Solve cap rate when you already have NOI and price. Solve price when you have NOI and the cap rate you need. Solve required income when you have a price and a target cap rate. Building NOI from rent, vacancy, reimbursements, and landlord expenses is a different worksheet — do that on the NOI calculator, then bring the income back here.
Why did the seller's cap rate and mine come out different on the same deal?
You divided different numbers. Common culprits: they used pro-forma rent (post-bump), excluded a management fee you'll actually pay, or quoted cap on 'price after credits.' Recompute with contract rent and the real all-in price. A quarter-point of cap-rate fog on a $2M deal is $70,000 of price — the most profitable arithmetic check in real estate.
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