Cap Rate Calculator

A capitalization rate (cap rate) is the ratio of a property's Net Operating Income (NOI) to its current market value or purchase price. It represents the expected rate of return on a real estate investment, assuming an all-cash purchase. Cap rates are the most common metric for comparing CRE investment opportunities.

Cap rates vary significantly by property type, location, and market conditions. In 2025-2026, typical ranges are: Multifamily 4.5%-6.5%, Industrial 5.0%-7.0%, Retail 6.0%-8.5%, Office 6.5%-9.0%, and Hospitality 7.0%-10.0%. Lower cap rates indicate lower risk and higher prices, common in core markets like LA, NYC, and Miami.

Property Value = NOI / Cap Rate. For example, a property with $200,000 NOI at a 6% cap rate would be valued at $200,000 / 0.06 = $3,333,333. This formula is the inverse of the cap rate calculation and is widely used in CRE underwriting and appraisals.

Not necessarily. A lower cap rate means a higher price relative to income, which typically reflects lower risk (better location, credit tenants, newer construction). A higher cap rate may indicate higher risk but also higher potential returns. The right cap rate depends on your investment strategy, risk tolerance, and the specific market.