Cap Rate Calculator

Calculate capitalization rate from NOI and property value, or find implied property value from NOI and target cap rate.

Cap rate · Property value · NOI builder · Market benchmarks
Cap Rate Calculator
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Cap Rate Benchmarks by Property Type (2025–2026)

Market cap rates vary by location, asset quality, and interest rate environment. These ranges reflect typical institutional market data.

Property TypeTypical Cap Rate RangeNotes
Multifamily — Class A Urban3–5%NYC, LA, SF; compressed due to demand
Multifamily — Suburban / Class B5–7%Secondary markets, older builds
Single-Family Rental (SFR)4–7%Varies heavily by market
Industrial / Warehouse4–6%E-commerce demand has compressed rates
Retail — Anchored Strip Center6–8%Grocery-anchored at lower end
Retail — Single-Tenant NNN4–6%Credit tenants (CVS, Dollar General)
Office — CBD Class A6–9%Risk premium for remote work uncertainty
Office — Suburban / Class B8–12%Distress-level rates common
Self-Storage5–7%Recession-resilient; demand stable
Hotel / Hospitality8–12%Operational risk; market-dependent
Senior Housing / Medical Office6–8%Healthcare real estate premium

Cap Rate Formula and What It Tells You

Cap Rate = Net Operating Income ÷ Property Value

The capitalization rate expresses a property's income relative to its value as a percentage. It's the most widely used metric for comparing investment properties because it strips out financing — two investors with different mortgage rates see the same cap rate on the same property.

Cap rate vs. cash-on-cash return

Cap rate is unlevered — it ignores how you financed the purchase. Cash-on-cash return divides annual cash flow after debt service by your actual cash invested. A property might have a 6% cap rate but a 10% cash-on-cash return if you used favorable leverage.

NOI: what's included and excluded

NOI includes: gross rents minus vacancy plus other income, minus property taxes, insurance, maintenance, management fees, and utilities you pay. NOI excludes: mortgage principal and interest, depreciation, capital expenditures, and income taxes. These are personal/financing items that vary by investor.

Related: ROI Calculator · Break-Even Calculator · Profit Margin Calculator

FAQ

Cap rate questions answered

What is cap rate in real estate?
Cap rate = Net Operating Income ÷ Property Value × 100. A 6% cap rate means the property earns 6% of its value per year in NOI. It's used to compare properties and estimate value without the noise of different financing structures.
What is a good cap rate?
There's no universal answer. Lower cap rates (3–5%) indicate premium assets in high-demand markets with lower risk. Higher cap rates (8–12%) indicate higher risk, lower-demand areas, or distressed assets. A "good" cap rate meets your return requirements for the risk you're taking.
How do I calculate NOI?
NOI = Gross Rental Income − Vacancy Losses − Property Taxes − Insurance − Maintenance − Property Management − Other Operating Costs. Do NOT subtract mortgage payments or depreciation. NOI is purely an operating measure.
What is the difference between cap rate and ROI?
Cap rate is unlevered — it doesn't account for financing. ROI accounts for all costs including down payment and financing. Cash-on-cash return is the most similar to ROI for rental properties: annual cash flow after mortgage payments ÷ total cash invested.