Cap Rate Calculator

Cap Rate is evaluated from Gross Rental Income, Vacancy & Credit Loss and Total Operating Expenses. The calculation reports Effective Gross Income, Net Operating Income and Cap Rate.

Results

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About the Cap Rate Calculator

Cap Rate is treated here as a quantitative relation between Gross Rental Income, Vacancy & Credit Loss, Total Operating Expenses and Property Value / Purchase Price and Effective Gross Income, Net Operating Income, Cap Rate and Implied Property Value.

The calculator uses a multi formula configuration. Each reported value is read as a direct evaluation of the stored rules with the declared field formats and units.

Formula basis:
NOI = gross income minus vacancy minus operating expenses (not including debt service). Cap rate = NOI / property value. Higher cap rate = higher return but typically higher risk. Use market cap rate to back-calculate implied property value.

Interpret the outputs in the order shown by the result fields. Optional inputs affect only the outputs that depend on those variables.

Formula & How It Works

The calculation applies the following relations exactly as recorded in the metadata:

NOI = gross income minus vacancy minus operating expenses (not including debt service). Cap rate = NOI / property value. Higher cap rate = higher return but typically higher risk. Use market cap rate to back-calculate implied property value.

Each output field is produced by substituting the supplied inputs into the relevant relation and then applying the declared rounding or text format.

Worked Examples

Example 1: Office building: $1.2M, $90K NOI

Inputs

gross_rental_income: 120000 vacancy_credit_loss: 5 operating_expenses: 35000 property_value: 1200000 market_cap_rate: 6.5
Effective Gross Income: $114,000. Net Operating Income: $79,000. Cap Rate: 6.58%. Implied Property Value: $1,215,385. Expense Ratio: 30.7%. GRM / NOI Multiplier: 15.2 x

With Gross Rental Income = 120,000, Vacancy & Credit Loss = 5, Total Operating Expenses = 35,000 and Property Value / Purchase Price = 1,200,000 as the stated inputs, the result is Effective Gross Income = $114,000, Net Operating Income = $79,000 and Cap Rate = 6.58%. Each value corresponds to the declared output fields.

Example 2: Apartment complex: $3M, 20 units at $1,500/unit

Inputs

gross_rental_income: 360000 vacancy_credit_loss: 5 operating_expenses: 120000 property_value: 3000000 market_cap_rate: 5
Effective Gross Income: $342,000. Net Operating Income: $222,000. Cap Rate: 7.4%. Implied Property Value: $4,440,000. Expense Ratio: 35.1%. GRM / NOI Multiplier: 13.5 x

With Gross Rental Income = 360,000, Vacancy & Credit Loss = 5, Total Operating Expenses = 120,000 and Property Value / Purchase Price = 3,000,000 as the stated inputs, the result is Effective Gross Income = $342,000, Net Operating Income = $222,000 and Cap Rate = 7.4%. Each value corresponds to the declared output fields.

Example 3: Retail strip mall: $2.5M, $175K gross rents

Inputs

gross_rental_income: 175000 vacancy_credit_loss: 8 operating_expenses: 55000 property_value: 2500000 market_cap_rate: 6
Effective Gross Income: $161,000. Net Operating Income: $106,000. Cap Rate: 4.24%. Implied Property Value: $1,766,667. Expense Ratio: 34.2%. GRM / NOI Multiplier: 23.6 x

With Gross Rental Income = 175,000, Vacancy & Credit Loss = 8, Total Operating Expenses = 55,000 and Property Value / Purchase Price = 2,500,000 as the stated inputs, the result is Effective Gross Income = $161,000, Net Operating Income = $106,000 and Cap Rate = 4.24%. Each value corresponds to the declared output fields.

Example 4: Self-storage facility: $4M purchase, $400K gross revenue

Inputs

gross_rental_income: 400000 vacancy_credit_loss: 10 operating_expenses: 100000 property_value: 4000000 market_cap_rate: 5.5
Effective Gross Income: $360,000. Net Operating Income: $260,000. Cap Rate: 6.5%. Implied Property Value: $4,727,273. Expense Ratio: 27.8%. GRM / NOI Multiplier: 15.4 x

With Gross Rental Income = 400,000, Vacancy & Credit Loss = 10, Total Operating Expenses = 100,000 and Property Value / Purchase Price = 4,000,000 as the stated inputs, the result is Effective Gross Income = $360,000, Net Operating Income = $260,000 and Cap Rate = 6.5%. Each value corresponds to the declared output fields.

Common Use Cases

  • Calculate cap rate for commercial property
  • Determine property value from NOI and cap rate
  • Compare investment properties by cap rate