Cap Rate & Property Value Calculator
Solve for cap rate, value or NOI in either direction.
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Results
Cap rate
8.00%
$32,000 NOI on $400,000
Cap rate expresses unlevered yield. Because value equals NOI divided by cap rate, small movements in market cap rates swing valuations sharply — this is why rising interest rates push property values down even when rents hold steady.
8.00% · Cap rate
How this is calculated
Cap rate, value and NOI form a three-way relationship. Know any two and the third follows:
cap rate = NOI ÷ value × 100
value = NOI ÷ cap rate × 100
NOI = value × cap rate ÷ 100
Net operating income itself is income after operating costs but before financing:
NOI = gross income − operating expenses
Operating expenses include property taxes, insurance, management, repairs, utilities paid by the owner and reserves. They exclude mortgage principal and interest, depreciation and capital improvements — including debt in NOI is the most common error in amateur underwriting.
The operating expense ratio, expenses divided by gross income, is a useful sanity check. Residential rentals typically run 35–50%; a seller's pro forma showing 20% usually omits management, vacancy or reserves.