Cap Rate Calculator – Capitalization Rate for Real Estate
Calculate cap rate, property value, or NOI from any two known values. Built for real estate investors — includes a full NOI builder, 2026 benchmarks by property type, and all three formula variations.
Example: NOI $60,000 ÷ Property Value $1,000,000 = 6.0% Cap Rate
Use this table to evaluate whether your property's cap rate is competitive for its asset class. Data reflects national averages for stabilized US properties as of early 2026.
| Property Type | Cap Rate Range | Visual | Risk Level | Notes |
|---|---|---|---|---|
| Class A Industrial | 4.5% – 6.5% | Low | Driven by e-commerce; tightest spreads | |
| Class A Multifamily | 4.0% – 5.5% | Low | Major metros; high demand, stable rents | |
| Class B/C Multifamily | 5.5% – 9.0% | Low-Med | Value-add opportunities; higher yield | |
| Single-Family Rental | 3.0% – 7.0% | Low-Med | Strong markets 3–5%; secondary 5–7% | |
| Retail (Essential) | 6.2% – 7.1% | Medium | Grocery-anchored; resilient | |
| Small Commercial Retail | 6.0% – 8.0% | Medium | Strip malls, neighborhood retail | |
| Office (Class A) | 7.5% – 10%+ | High | Remote work uncertainty; wide range | |
| Select-Service Hotels | 7.0% – 10%+ | High | Operational complexity; seasonal |
✱ Sources: CBRE H2 2025 Cap Rate Survey, ClearHouse Lending 2026 CRE Guide. Cap rates vary by market tier, asset quality, and local supply/demand conditions.
The Cap Rate Formula
The capitalization rate formula is: Cap Rate (%) = NOI ÷ Property Value × 100. For example, a property with $75,000 NOI and a $1,250,000 value has a cap rate of $75,000 ÷ $1,250,000 × 100 = 6.0%. This is the standard formula used by appraisers, brokers, and commercial real estate lenders. [web:50][web:51]
How to Calculate NOI for a Cap Rate
NOI = Gross Rental Income − Vacancy Losses − Operating Expenses. Operating expenses include property taxes, insurance, maintenance, and property management fees. Do NOT subtract mortgage payments — NOI is a pre-financing metric. Use our built-in NOI builder above to calculate NOI from individual line items.
Solve for Property Value
If you know the market cap rate and the property's NOI, you can estimate the property's fair market value: Property Value = NOI ÷ Cap Rate. Example: NOI $60,000 ÷ Cap Rate 6% = $1,000,000 implied value. This is the income capitalization approach used by commercial appraisers.
Cap Rate vs. Cash-on-Cash Return
Cap rate assumes an all-cash purchase — it ignores financing. Cash-on-cash return measures return on your actual down payment using mortgage financing. Use cap rate to compare properties; use cash-on-cash to evaluate your specific deal. A 6% cap rate with 75% LTV financing at 7% interest produces a negative cash-on-cash return.
What Is a Good Cap Rate in 2026?
In 2026, a good cap rate depends on property type and location. Class A multifamily in major metros averages 4–5.5%. Industrial averages 4.5–6.5%. Retail averages 6–8%. Office can exceed 7.5% due to remote work risk. Generally, 5–8% is a solid range for most residential investment properties. A very high cap rate (10%+) may signal higher risk or a distressed asset.
Cap Rate (%) = Net Operating Income (NOI) ÷ Property Value × 100. Example: $60,000 NOI ÷ $1,000,000 property value = 6.0% cap rate. You can also solve backwards: Property Value = NOI ÷ Cap Rate.
Cap rate is calculated by dividing the annual net operating income (NOI) by the current market value or purchase price, then multiplying by 100. NOI excludes mortgage payments but includes all operating expenses like taxes, insurance, and maintenance.
For commercial properties: calculate gross potential income from all rents, subtract vacancy losses (typically 5–10%), add other income, then subtract all operating expenses. The result is NOI. Divide NOI by property value × 100 for the cap rate.
In 2026, good cap rates by type: Multifamily Class A: 4–5.5%. Multifamily Class B/C: 5.5–9%. Industrial: 4.5–6.5%. Retail: 6–8%. Office: 7.5%+. Single-family rentals: 3–7%. A good cap rate in one market may be average in another.
Simply divide: Cap Rate = NOI ÷ Property Value. Then multiply by 100 to express as a percentage. Example: $75,000 NOI ÷ $1,250,000 property value = 0.06 = 6% cap rate.
Cap rate assumes all-cash purchase and measures return based on total property value. ROI includes financing and measures return on your actual cash invested. Cap rate is ideal for comparing properties objectively; ROI evaluates your specific leveraged deal.
NOI = Gross Rental Income − Vacancy Losses − Operating Expenses. Include property taxes, insurance, maintenance, management fees, and utilities paid by the owner. Exclude mortgage principal and interest — NOI is always calculated before financing costs.
Yes. Cap rate is used for any income-producing property — single-family rentals, small multifamily (duplexes, triplexes), and large apartment complexes. For owner-occupied homes, cap rate is not applicable since there is no rental income.