Cap Rate Calculator
Calculate capitalization rate, property value, and NOI for real estate investments. Compare against market benchmarks by property type.
Property Details
Market cap rate range: 5% - 7.5%
Valuation Results
Cap Rate Benchmarks by Property Type (2025)
| Property Type | Low Cap | Mid Cap | High Cap |
|---|---|---|---|
| Class A Multifamily | 4% | 5% | 6% |
| Class B Multifamily | 5% | 6% | 7.5% |
| Class C Multifamily | 6.5% | 8% | 10% |
| Office - CBD | 5.5% | 7% | 9% |
| Office - Suburban | 6.5% | 8% | 10% |
| Retail - Strip Center | 6% | 7.5% | 9.5% |
| Retail - NNN Lease | 5% | 6% | 7.5% |
| Industrial / Warehouse | 5% | 6.5% | 8% |
| Self Storage | 5.5% | 7% | 9% |
| Hotel / Hospitality | 7% | 9% | 12% |
* Cap rates vary by location, property condition, tenant quality, and market conditions. These are national averages for stabilized properties.
About This Calculator
Calculate capitalization rate for investment properties. Analyze real estate deals by comparing net operating income to property value with cap rate benchmarks by market and property type.
Frequently Asked Questions
What is a cap rate?
Cap rate (capitalization rate) is the ratio of Net Operating Income (NOI) to property value, expressed as a percentage. It measures the expected rate of return on a real estate investment.
What is a good cap rate?
A good cap rate depends on property type and location. Generally, 4-6% is considered low risk (Class A properties), 6-8% is moderate, and 8%+ indicates higher risk but potentially higher returns.
How do you calculate property value from cap rate?
Property Value = NOI / Cap Rate. For example, if NOI is $100,000 and cap rate is 5%, the property value is $100,000 / 0.05 = $2,000,000.
What is a good cap rate for a rental property in 2025?
Cap rate (capitalization rate) equals Net Operating Income (NOI) divided by current property value. What constitutes a 'good' cap rate depends on market, property type, and risk tolerance. In 2025, gateway markets like Manhattan and San Francisco typically see multifamily cap rates of 3.5-5%. Secondary markets like Phoenix, Atlanta, and Dallas range from 5-7%. By property class, Class A stabilized multifamily trades at 4-5.5%, Class B at 5.5-7%, and Class C value-add at 7-9%. Commercial properties vary: industrial/warehouse averages 5-6.5%, retail strip centers 6-8%. A higher cap rate signals higher return but also higher perceived risk. Cap rate compression characterized 2020-2022; 2025 sees cap rate expansion as interest rates remain elevated.
How do I calculate Net Operating Income for the cap rate formula?
To calculate NOI accurately, start with Gross Potential Rent (GPR) — the total rent if all units are occupied at market rate. Subtract vacancy and credit losses (typically 5-10%), giving you Effective Gross Income (EGI). Then subtract all operating expenses. Expenses to include: property taxes, insurance, property management fees (8-12% of collected rent), maintenance and repairs (budget 1-2% of property value annually), landscaping, utilities paid by owner, and a capital expenditure reserve ($50-100/unit/month). For a $1.2M 8-unit building: GPR = $96,000/year, less 7% vacancy = $89,280 EGI. Expenses: taxes ($12,000) + insurance ($4,500) + management ($8,928) + maintenance ($8,000) + reserves ($6,400) = $39,828. NOI = $49,452. Cap Rate = 4.1%. Critical: do NOT include mortgage payments, depreciation, or income taxes in NOI.