Cap rate is the great equalizer: one percentage that lets a duplex in El Paso and a fourplex in Dallas be compared on the same scale. It is net operating income divided by price — which means the honest work is in the NOI. This calculator builds the NOI in the open, then runs the rate both directions.
Step 1. Enter the Monthly Rent across all units — actual or market rent, labeled honestly in your notes.
Step 2. Enter the Property Price / Value you are testing.
Step 3. Open Advanced and enter vacancy, taxes, insurance, maintenance, management, and other yearly expenses — every line, every time.
Step 4. Set a Target Cap Rate to see the value this NOI actually supports at your standard.
Step 5. Compare the Cap Rate across properties, and the asking price against the value-at-target.
Gross Potential Rent = Monthly Rent × 12. Effective Gross Income = Gross Potential Rent × (1 − Vacancy%).
Operating Expenses = Taxes + Insurance + Maintenance + Other + (Effective Gross Income × Management%). The mortgage is never an operating expense — cap rate measures the property, not your loan.
NOI = Effective Gross Income − Operating Expenses. Cap Rate = NOI ÷ Price. Value at Target Cap = NOI ÷ Target Cap Rate.
That last formula is the investor's lie detector: it converts an income stream into the price that income justifies at your required return.
What a good cap rate actually depends on — market, age, and honesty about expenses.
Where cap rate sits in a full underwrite.
Building net operating income line by line.
It depends on the market and the property's age and risk — there is no national 'good'. What is always true: a cap rate built on missing expenses is fiction. Fill every line, then compare properties in the same market.
Cap rate measures the property itself, so buyers with different loans can compare the same building. Your loan belongs in the cash-flow calculator, not here.
Yes — the math is identical. It is most common in multifamily, but any income property can be cap-rated.
Use tax records for taxes, a real insurance quote, and honest allowances for maintenance and management — then say so in your notes. An estimated NOI labeled as estimated beats a precise-looking one that is invented.