Find the capitalization rate of an income property and the value implied by a target cap rate.
Annual net operating income: rent minus vacancy, maintenance, tax, and insurance, before mortgage and income tax.
Current market value or purchase price of the property.
Cap rate you would accept; used only to infer what value the same NOI would imply at that rate.
Cap Rate
6%
NOI as a percentage of property value — a yield-like measure that is comparable across properties.
Value at Target Cap Rate
$342,857.14
The price that would make this NOI yield exactly the target cap rate.
What this means
A compact yield lens for income property. Higher is not universally better — it often signals higher risk or required capital.
The capitalization (cap) rate expresses a property’s net operating income as a percentage of its value. It is a staple metric for comparing income properties of any size.
Formula
cap rate = NOI ÷ property value | implied value = NOI ÷ target cap rate
Worked examples
FAQ
What is a good cap rate?
There is no universal number. Cap rates of 5–10% are common, but they vary by market, property type, and risk profile.
How is net operating income defined?
NOI is annual rental income minus operating expenses (maintenance, property tax, insurance), before mortgage payments and income tax.
Limitations