Calculate the capitalization rate (cap rate) for any investment property. Find NOI and implied property value.
Typical: 5–10%
Tax, insurance, mgmt, maintenance
For implied value calculation
Net Operating Income ÷ Value
Annual net operating income
| Gross Annual Rent | $33,600 |
| Vacancy Loss (5%) | -$1,680 |
| Effective Gross Income | $31,920 |
| Annual Operating Expenses | -$9,600 |
| Net Operating Income (NOI) | $22,320 |
| Property Value | $400,000 |
| Cap Rate | 5.58% |
| Implied Value at 6% Cap Rate | $372,000 |
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Cap Rate = NOI ÷ Property Value × 100
NOI = Gross Rent × (1 − Vacancy%) − Operating Expenses
Implied Value = NOI ÷ Cap Rate × 100
Excludes mortgage payments (financing-neutral metric).
Depends on market: 3–5% cap rates are common in prime urban markets (NYC, SF, LA). 5–7% is typical for suburban markets. 7–10%+ indicates higher returns but often higher risk (lower-demand areas, older properties). Most single-family investors target 5–7%.
Cap Rate = Net Operating Income (NOI) ÷ Property Value × 100. NOI = Annual gross rent − Vacancy loss − Operating expenses. Expenses include property tax, insurance, management, maintenance, and repairs. Mortgage payments are NOT included in NOI.
Cap rate ignores financing — it measures property performance independent of mortgage. Cash-on-cash return accounts for your actual cash investment (down payment) and mortgage debt service, showing your leveraged return on invested cash.
Yes! Property Value = NOI ÷ Cap Rate. If market cap rates are 6% and your property has $30,000 NOI, the implied value is $500,000. This is how commercial real estate appraisers value income-producing properties.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.