📊 Deal Analysis
Cap Rate
Calculator
Calculate capitalization rate from NOI and property value. Instantly understand how your deal compares to market benchmarks.
Calculate Cap Rate from NOI & Value
— OR calculate NOI from income/expenses —
Capitalization Rate
6.0%
NOI $18,000 ÷ Value $300,000
Annual NOI
$18,000
Net Operating Income
Implied Value
—
At current cap rate
Gross Yield
—
Gross Rent ÷ Value
Value Change per 1%
—
NOI stays constant
Market Cap Rate Benchmarks
| Market Type | Typical Range | Your Deal |
|---|
| Primary Markets (NYC, LA, SF) | 3–5% | — |
| Secondary Markets (Nashville, Denver) | 5–7% | — |
| Tertiary/Midwest Markets | 7–10% | — |
| Class A (Trophy Assets) | 3–5% | Lower risk, lower yield |
| Class C (Value-Add) | 8–12% | Higher risk, higher yield |
Reverse: What Should I Pay?
Given your NOI, what property value achieves your target cap rate?
Find properties that hit your cap rate target
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Frequently Asked Questions
What is a good cap rate for rental property? ▾
A good cap rate depends on the market. In primary markets (NYC, LA, SF), 3-5% is typical for quality assets. In secondary markets (Nashville, Denver, Phoenix), 5-7% is common. In tertiary and Midwest markets, 7-10%+ is achievable. Class A properties command lower cap rates due to lower risk; Class C value-add properties command higher rates. Don't compare cap rates across different market types — compare within the same sub-market.
How do you calculate cap rate? ▾
Cap Rate = Net Operating Income / Property Value × 100. NOI is gross rental income minus vacancy losses minus all operating expenses — property taxes, insurance, management fees, maintenance, utilities — but does NOT include mortgage payments. This makes cap rate a financing-independent metric that lets you compare deals regardless of how they're financed.
Does a higher cap rate mean a better investment? ▾
Not necessarily. Higher cap rates typically mean higher risk — older properties, lower-income areas, higher vacancy risk, more management-intensive. A 10% cap rate in a declining market may be worse than a 5% cap rate in an appreciating primary market. Always consider total return (cash flow + appreciation + equity paydown) not just the cap rate in isolation.
What is the relationship between cap rate and property value? ▾
Property Value = NOI / Cap Rate. If cap rates in a market compress (fall), property values rise even if NOI stays flat. This is how real estate values increase in low-interest-rate environments. A $100,000 NOI at a 5% cap rate = $2M value. The same NOI at a 6% cap rate = $1.67M. A 1-percentage-point cap rate expansion destroyed $333,000 in value — which is why rising rates hurt property values.