What does this calculator do?
Cap rate puts a property’s annual operating income in relation to its value. Excluding debt helps compare the real estate independently of different loan terms. The implied-value calculation reverses that relationship: holding NOI steady, a higher target cap rate produces a lower supported value. Use consistent operating-cost definitions when comparing listings.
How to use it
- Build annual NOI from supportable collected income less recurring operating costs.
- Choose a purchase price or current value and clearly identify which you used.
- Use a target cap rate only as a valuation scenario, informed by comparable local transactions.
The math, made clear
Cap rate = annual NOI ÷ property value × 100; implied value = annual NOI ÷ target cap-rate fractionA worked example
$24,000 annual NOI divided by $350,000 value gives a 6.86% cap rate. At a 7% target cap rate, that same NOI implies approximately $342,857 in value.
What to keep in mind
Cap rate excludes financing, acquisition costs, capital reserves, income taxes, and appreciation. It is a one-year income snapshot. Negative NOI produces a negative cap rate and no meaningful positive income-capitalization valuation. A higher cap rate can signal higher risk, not simply a better purchase.
All default values are illustrative. Results are rounded for display; calculations use full precision except where a split must allocate exact cents. Read our methodology for shared definitions and report a calculation issue if a result looks wrong.