Capitalization Rate Calculator
Calculate cap rate, property value, or NOI for real estate investments. Uses standard income capitalization formula with instant results.
About
The capitalization rate is the ratio of a property's net operating income (NOI) to its current market value. A miscalculated cap rate distorts every downstream investment decision: overpaying by even 0.5% on a $2M asset means roughly $200,000 in lost equity. This calculator applies the standard income capitalization approach used by appraisers under USPAP and IVS frameworks. It solves for any one of the three variables - cap rate, property value, or NOI - given the other two. Results assume stabilized annual income and do not account for financing structure, vacancy fluctuation beyond your stated NOI, or capital expenditure reserves.
Pro tip: compare your result against local market cap rates before making offers. A cap rate significantly below the market average signals overpayment risk. A rate significantly above it may indicate deferred maintenance or tenant credit risk that the seller has priced in. This tool approximates value under the direct capitalization method only. It does not perform discounted cash flow analysis or account for reversion value at sale.
Formulas
The direct capitalization method expresses the relationship between three variables. Given any two, the third is derived algebraically.
Where NOI = Net Operating Income, the annual income after all operating expenses (property taxes, insurance, maintenance, management fees) but before debt service and capital expenditures. V = Current market value or purchase price of the property. Cap Rate = Capitalization rate expressed as a percentage. The formula assumes stabilized, annualized income with no extraordinary items.
Reference Data
| Property Type | Typical Cap Rate Range | Risk Profile | Typical NOI Margin | Common Lease Term |
|---|---|---|---|---|
| Class A Office (CBD) | 4.0 - 5.5% | Low | 60 - 70% | 5 - 10 yrs |
| Class B Office (Suburban) | 5.5 - 7.5% | Moderate | 55 - 65% | 3 - 7 yrs |
| Multifamily (Class A) | 3.5 - 5.0% | Low | 55 - 65% | 1 yr |
| Multifamily (Class C) | 5.5 - 8.0% | High | 45 - 55% | 1 yr |
| Retail (Strip Mall) | 6.0 - 8.5% | Moderate - High | 50 - 65% | 3 - 5 yrs |
| Retail (NNN Single Tenant) | 4.5 - 6.5% | Low | 90 - 99% | 10 - 20 yrs |
| Industrial / Warehouse | 4.5 - 7.0% | Low - Moderate | 65 - 75% | 5 - 10 yrs |
| Self-Storage | 5.0 - 7.5% | Moderate | 60 - 70% | Month-to-month |
| Hotel (Full-Service) | 6.5 - 9.0% | High | 25 - 40% | Nightly |
| Hotel (Limited-Service) | 7.0 - 10.0% | High | 35 - 50% | Nightly |
| Medical Office | 5.0 - 7.0% | Low - Moderate | 55 - 65% | 5 - 10 yrs |
| Senior Housing | 5.5 - 8.0% | Moderate | 30 - 45% | Month-to-month |
| Student Housing | 4.5 - 6.5% | Moderate | 50 - 60% | 1 yr |
| Data Center | 4.0 - 6.0% | Low | 40 - 55% | 5 - 15 yrs |
| Mobile Home Park | 5.0 - 8.0% | Moderate | 60 - 75% | Month-to-month |
| Mixed-Use Urban | 4.5 - 6.5% | Low - Moderate | 55 - 65% | Varies |
| Parking Garage | 5.5 - 8.0% | Moderate | 60 - 75% | Monthly |
| Single-Family Rental | 4.5 - 7.5% | Moderate | 40 - 55% | 1 yr |
| Gas Station / C-Store | 5.0 - 7.5% | Moderate | 70 - 85% | 10 - 20 yrs |
| Farmland / Agricultural | 2.0 - 4.0% | Low | 30 - 50% | 1 - 5 yrs |