Free tool · Cap rate
Cap rate calculator.
Enter NOI and price — see the capitalization rate, the unlevered going-in yield that prices the asset. Plus what the same income is worth at other cap rates. No login.
The deal
Annual, before debt service.
Cap rate
6.50%
NOI ÷ price
Price per $1 NOI
15.4×
the income multiple
This NOI is worth
What the cap rate tells you
The capitalization rate is net operating income divided by price — the unlevered, first-year yield you'd earn if you bought the asset for cash. It's the market's single-number verdict on an income stream: a lower cap rate means buyers will pay more per dollar of NOI (a higher multiple), usually because they expect growth or see less risk; a higher cap rate means the opposite.
Because value = NOI ÷ cap rate, the cap rate is also the lever that turns operational improvement into value. Add $50,000 of NOI at a 6% cap and you've created roughly $830,000 of value. It's why the exit cap assumption — where you'll sell, in cap-rate terms — often swings a deal's return more than any single operating input.
Is a higher or lower cap rate better?
It depends on which side you are on. As a buyer, a higher cap rate means a cheaper price per dollar of income — but usually more risk or less growth. Prime, stable assets trade at low cap rates; secondary or value-add deals at higher ones.
Cap rate vs. yield-on-cost?
Cap rate uses current price; yield-on-cost uses your all-in basis including renovation. On a value-add deal the gap between your yield-on-cost and the market cap rate is where the value creation shows up.
What cap rate should I use for exit?
A common convention is to exit at or slightly above the going-in cap rate to stay conservative, since you cannot know future market conditions. Small changes matter a lot — model a range.
The going-in identity: cap rate = NOI ÷ price, and its inverse, the price you pay per dollar of income. New to the metric? Read cap rate vs IRR vs equity multiple. Not investment advice.
See it on a real deal.
In Nivora this runs off your actual rent roll and T-12 — the full monthly model, reconciled to the penny. See it live on a fictional sample deal.