Free tool · Cap rate
Cap rate calculator.
Enter NOI and price to 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. If the metric is new to you, 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.