Illustrative example
Calculate cap rate
With illustrative annual NOI of $300,000 and a $5,000,000 property value, cap rate is $300,000 ÷ $5,000,000 × 100 = 6.00%.
Investor Tools
Cap Rate Calculator
Calculate a property capitalization rate or estimate value from annual net operating income and a cap-rate assumption.
Enter annual NOI and property value to calculate cap rate.
Illustrative example
Estimate property value
With illustrative annual NOI of $300,000 and a 6.00% cap rate, estimated value is $300,000 ÷ 0.06 = $5,000,000.
Frequently asked questions
How do I calculate a property cap rate?+
Divide annual net operating income by property value or purchase price, then multiply by 100 to express the result as a percentage.
How do I estimate property value from NOI and cap rate?+
Divide annual NOI by the cap rate expressed as a decimal. For example, divide by 0.06 when using a 6.00% cap-rate assumption.
Does cap rate include financing costs?+
No. Cap rate is a property-level relationship between NOI and value before debt cost and investor-level taxes. It does not measure cash-on-cash return or total return.
Can cap rate determine whether a property is attractive?+
Not by itself. Market evidence, property condition, leases, expense quality, capital needs, location, growth assumptions, and financing all require separate analysis.
Keep exploring
Continue the property valuation analysis
Use market and property evidence to put the calculated cap rate or estimated value in context.
Guide
Cap Rate in Real Estate
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Guide
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Guide
Debt Yield in Commercial Real Estate
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Financing
Investment Property Loans
Explore Pillar’s financing page for multifamily and commercial investment scenarios.