Cap Rate Calculator
Cap Rate = Net Operating Income ÷ Property Value × 100
What the cap rate tells you
The capitalization rate expresses a property’s unlevered annual return at a given price. It is the single most common shorthand in commercial real estate for comparing assets — but it says nothing about financing, tax position, or how durable the income actually is.
Worked example
A Las Vegas multi-tenant industrial building produces $850,000 of net operating income and is priced at $12,500,000.
$850,000 ÷ $12,500,000 = 6.80%
The calculator also shows what the same NOI would be worth at benchmark cap rates, which is the more useful direction of travel when you are testing a price rather than accepting one.
What to watch
- A cap rate is only as good as the NOI behind it. Confirm whether the figure is actual, pro-forma, or a broker’s stabilised projection.
- Check what is excluded. Reserves, management fees and capital expenditure are frequently left out of a marketed NOI.
- Short weighted-average lease term, single-tenant exposure or below-market rents all justify a higher cap rate for the same income.