Cap Rate Calculator
Compute cap rate (Net Operating Income / Property Value) for commercial real estate. Forward + reverse modes. Includes vacancy + expense breakdowns.
Cap Rate Calculator
📊 Income + expenses
🏢 Property value or target rate
How to use the Cap Rate Calculator
Pick the mode
"Compute cap rate": you have a property's asking price + financials and want to know the cap rate to compare against benchmarks. "Compute max value": you have a target cap rate (e.g., 7% for your investment criteria) and want to know the maximum you should pay given the property's NOI. Both modes use the same core formula — just rearranged.
Get the income + expenses right
Cap rate is only as good as the NOI calculation. Gross rental income: what the property would collect at 100% occupancy at market rents (not below-market historical rents). Vacancy: use the submarket's actual vacancy from a broker survey or the property's own history, not a default. Operating expenses: property taxes, insurance, property management (use the quoted fee), repairs and maintenance, HOA / strata fees, utilities if landlord-paid. Do NOT include mortgage interest, depreciation or capital expenditure — cap rate is unlevered and pre-capex.
Compare against asset-class benchmarks
Cap rates vary by asset class, location and where the rate cycle sits, so there is no fixed scale. The advisory under the results shows broad bands that were typical of US broker surveys in 2024; treat them as orientation and check the current CBRE, JLL or Cushman & Wakefield cap-rate survey for your market before drawing a conclusion. The same 9% that signals distress in a prime CBD tower is unremarkable for a Class C building in a small market.
Use cap rate for screening, not decision-making
Cap rate is a first-screen metric — useful for quickly comparing 20 properties to find the 3-5 worth deeper analysis. Final decisions require: financing math (which determines cash-on-cash return), tenant quality + lease structure, capex needs, market trajectory, and your specific tax situation. Cap rate doesn't capture any of these. Use this tool to filter; use a full pro forma DCF analysis to commit.
Cap rate — the universal language of commercial real estate
Cap rate (capitalization rate) is to commercial real estate what P/E ratio is to public equities — a quick comparative metric that lets you screen many properties on a common scale. The math: Cap Rate = NOI ÷ Property Value. NOI (Net Operating Income) is rental income minus all operating expenses except mortgage interest and depreciation. Cap rate is intentionally unlevered — it ignores how the property is financed, letting you compare it across buyers with different capital structures. A 6% cap rate property is the same 6% cap rate whether bought cash or with 80% leverage. The financing question is separate, captured by cash-on-cash return (see our Cash-on-Cash Return Calculator).
Why cap rates vary so widely across asset classes
Cap rate is fundamentally a yield premium over risk-free rates plus compensation for the property's specific risks. Higher cap rate = higher risk OR higher reward. Trophy assets in tier-1 cities (Manhattan office, London Mayfair retail, Singapore CBD office) trade at the lowest cap rates because: (1) capital appreciation is expected to carry much of the return; (2) institutional buyers accept a low current yield for stability; (3) liquidity is high. At the other end, Class C properties in small markets trade at the highest cap rates because: (1) vacancy risk, deferred maintenance and weaker tenants; (2) a smaller buyer pool; (3) lower liquidity. Remember that a cap rate is the reciprocal of a price multiple — 5% is 20 times NOI, 8% is 12.5 times — so the gap between the two ends is a large gap in price for the same dollar of income.
Cap rate is a yield premium over risk-free rates. Higher cap = higher risk + lower price. Lower cap = lower risk + higher price. The market sorts properties by risk-adjusted yield.
The cap rate vs interest rate relationship
Cap rates have a strong but not perfect correlation with prevailing interest rates. When the 10-year US Treasury yield rises, cap rates tend to rise too — because investors demand a "spread" over risk-free rates. The spread is widest for the riskiest, least liquid assets and narrowest for prime ones. 2022–2024: the 10-year Treasury yield rose from about 1.5% at the end of 2021 to above 4.5% during 2023 (FRED series DGS10), and cap rates re-rated higher across most asset classes. The arithmetic is unforgiving: a property bought at a 4% cap rate that re-rates to 5.5% on unchanged NOI is worth 4 ÷ 5.5 = 73% of its purchase price — a 27% haircut before a dollar of income has changed. Run the reverse mode above with two target cap rates to see it on your own numbers. Over a multi-year hold, that re-rating risk is usually larger than the NOI risk.
The ASEAN commercial real estate angle
The formula is the same everywhere; what changes across ASEAN is the risk-free rate the spread sits on, the depth of the institutional buyer pool and the currency. Singapore prime CBD office sits at the low end of the regional range because global institutions, sovereign funds and listed S-REITs compete for it; Kuala Lumpur, Jakarta, Bangkok, Manila and Ho Chi Minh City prime office trade at progressively higher cap rates as currency risk rises and liquidity thins. For current figures use the Singapore URA quarterly real-estate statistics, the regional research desks of Knight Frank, JLL, CBRE or Colliers, and — for a listed comparison — the property yields disclosed in S-REIT annual reports, which state NOI and appraised value for every asset.
NOI ÷ value, unlevered by design, and how a cap-rate re-rating moves price
Cap Rate = NOI / Property Value. Unlevered yield on a commercial real estate investment. The universal screening metric.
Higher cap rate = higher risk + lower price. Lower cap rate = lower risk + higher price. The market sorts by risk-adjusted yield.
A cap rate is the reciprocal of a price multiple: 5% is 20 × NOI, 8% is 12.5 × NOI. Small differences in rate are large differences in price.
Cap rate is UNLEVERED — ignores financing. Same 6% cap rate whether bought cash or with 80% leverage. Cash-on-cash captures the financing impact.
Cap rates have a strong correlation with the 10-year Treasury yield (or local equivalent). When rates rise, cap rates rise; property values fall.
A re-rating from a 4% to a 5.5% cap rate on unchanged NOI leaves the property worth 4 ÷ 5.5 = 73% of its price — a 27% fall before income moves at all.
The "cap rate spread" over the 10-year Treasury is the premium for property risk. The 10-year rose from about 1.5% (end-2021) to above 4.5% (2023) — FRED series DGS10.
Reverse mode: maximum price = NOI ÷ target cap rate. Enter the return you require and the tool tells you the most you can pay.
Order of operations here: NOI = gross income × (1 − vacancy %) − operating expenses. Vacancy is taken off gross first; expenses are a fixed annual figure, not a percentage.
The expense ratio shown is operating expenses ÷ gross potential income. Listed REIT annual reports disclose NOI and appraised value per asset — a free source of real cap rates.
Frequently Asked Questions
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NOI (Net Operating Income) = Gross Rental Income − Vacancy − Operating Expenses (taxes, insurance, repairs, management, utilities, etc.). It EXCLUDES mortgage interest, depreciation, capex (capital expenditures, replacement reserves), and income taxes. NOI represents the property's pure operating profitability, independent of how it's financed or amortised. Cap rate uses NOI because it lets you compare properties on equal terms — two identical buildings with different mortgages have the same NOI and same cap rate.
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There is no universal "good" — only "appropriate for the asset class, the location, today's risk-free rate and your own return requirement". Prime assets in gateway cities carry the lowest cap rates, older buildings in small markets the highest, and every band moved up when Treasury yields rose in 2022–2023. Use the reverse mode: enter the cap rate you require given your cost of capital and the property's risk, and compare the maximum price it returns with the asking price. For market comparables, use a current broker cap-rate survey rather than a remembered range.
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Cap rate is UNLEVERED — NOI ÷ property value. Cash-on-cash is LEVERED — annual cash flow (after mortgage) ÷ cash invested. For a $1M property with 6% cap rate, NOI = $60K. With $250K down (25% LTV) and a $7K/mo mortgage payment ($84K/year), annual cash flow = $60K − $84K = -$24K. Cash-on-cash = -$24K / $250K = -9.6%. Same property at 7% cap rate with the same financing would have positive cash flow. Leveraged investors should focus on cash-on-cash; unlevered investors on cap rate. Use both together for full picture.
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Strongly. Cap rates move with the 10-year Treasury yield (or the local risk-free rate) because investors demand a spread over it for property risk. When rates rise, cap rates rise and property values fall. The 10-year Treasury yield rose from about 1.5% at the end of 2021 to above 4.5% during 2023 (FRED series DGS10), and cap rates re-rated higher across asset classes. A property bought at a 4% cap rate that later trades at 5.5% on the same NOI is worth 4 ÷ 5.5 = 73% of its purchase price — a 27% haircut from rate movement alone. This is why the rate outlook matters as much as the rent roll.
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No. High cap rate = high yield BUT also high risk: more vacancy, more tenant concerns, more deferred maintenance, less liquid market, less institutional demand. A 9% cap rate property in tier-3 city might LOOK better than 5% in Manhattan, but the 9% reflects compensation for material risks. Investors targeting high cap rates need to be ready for those risks: tenant turnover, capex surprises, slower appreciation. Lower cap rates trade for higher returns through appreciation and stability. Both can work; just match risk to your tolerance.
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Several sources. CBRE, JLL, Cushman & Wakefield, Knight Frank publish quarterly cap rate reports by metro + asset class. Real Capital Analytics tracks transaction data. For ASEAN: Knight Frank Asia, Colliers Asia, Cushman & Wakefield's APAC research all publish ASEAN-specific reports. For Singapore: URA quarterly market reports + SREITs research from DBS / OCBC / CIMB. For small markets: ask local brokers for "average cap rates in the last 6 months" — they'll have this from their own deal flow. Free public sources are limited; institutional sources are the gold standard.
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Both, but for different purposes. Trailing 12-month (T12) NOI: what the property actually generated last year. The most defensible number for negotiation. Use this for asking-price cap rates. Projected (proforma) NOI: what the property COULD generate after market-rent adjustments + cost optimisations. Sellers always use projected (higher) NOI to support higher asking prices; buyers should always test sensitivity using trailing (lower) NOI. The real intrinsic value is somewhere in between. A common screening rule: trust trailing NOI; reject deals priced off projected NOI assumptions you don't believe.
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Yes — cap rate math works identically for residential as commercial. Single-family rentals and small multifamily (2-4 unit) are commonly analysed via cap rate by retail investors. Caveat: residential rental markets are less institutional, so cap rates tend to be slightly higher (compensating for less liquidity + smaller transaction volumes) and have less "official" comp data. Use neighbourhood comparable sales + rental data from sites like Zillow, Rentometer, PropertyGuru, 99.co for ASEAN markets. For very small portfolios (1-4 units), use the GRM (Gross Rent Multiplier) for quick screening alongside cap rate.
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No. All calculations run entirely in your browser via JavaScript. There's no server roundtrip — open DevTools → Network and confirm zero outbound requests. Your property data stays on your device. Safe for confidential deal analysis, due diligence, or any sensitive commercial real estate data.
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Cap rate doesn't capture appreciation — only current income yield. Total CRE return = cap rate (income) + NOI growth (rental escalations) + cap rate compression (if rates fall). A trophy asset bought at a low cap rate relies on NOI growth and further cap-rate compression for most of its return; a high-cap-rate asset delivers most of its return as current income and offers less appreciation. Over a multi-year hold, total return matters more than the entry cap rate alone — cap rate is the income floor, appreciation the upside, and re-rating the risk.
Method & sources
How it computes
Direct capitalisation: cap rate = net operating income ÷ property value, where NOI = gross potential rental income × (1 − vacancy and concessions %) − annual operating expenses (excluding debt service, depreciation and capital expenditure). Reverse mode solves maximum value = NOI ÷ target cap rate. Expense ratio = operating expenses ÷ gross potential income.
What this tool implements
- Direct capitalisation R = I / V as defined in The Appraisal of Real Estate (Appraisal Institute); overall capitalisation rate on first-year NOI
- NOI is unlevered and pre-capex: no mortgage interest, depreciation, income tax or replacement reserves
- Vacancy and concessions applied to gross potential income first; operating expenses entered as an annual amount
- Reverse mode: maximum purchase price = NOI ÷ target cap rate
Sources
- Appraisal Institute. The Appraisal of Real Estate. 15th ed. Chicago: Appraisal Institute; 2020. (Direct capitalisation, income capitalisation approach.)
- Federal Reserve Bank of St. Louis, FRED. Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity (DGS10). https://fred.stlouisfed.org/series/DGS10
What can make this go out of date
- Market cap-rate bands quoted in the on-page advisory (US broker surveys, 2024) — revised quarterly by CBRE/JLL/Cushman & Wakefield; the tool does not fetch them
- 10-year Treasury yield referenced in the prose — daily, FRED DGS10
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