Cap Rate to Value Calculator
Convert a property’s net operating income and a market capitalization rate into an estimated property value.
How it works
Value = NOI ÷ cap rate · (cap rate entered as a percentage, converted to a decimal)
The capitalization rate is the return a buyer expects on a property’s income, so dividing net operating income by that rate gives what the income is worth today. A lower cap rate means buyers accept a smaller return — usually for safer, prime assets — which pushes value up; a higher cap rate means more demanded return and a lower price. Small changes in the assumed cap rate move value a lot, so the market rate you choose matters as much as the NOI.
Worked example
A building with $60,000 of annual NOI valued at a 6% market cap rate is worth 60,000 ÷ 0.06 = $1,000,000. If investors demanded 7.5% instead, the same income would be worth only about $800,000.
Frequently asked questions
Where do I get the cap rate to use?
From recent sales of comparable properties in the same market and class — cap rate equals their NOI divided by sale price. Brokers and appraisers publish prevailing cap rates by property type and city.
Why does a lower cap rate mean a higher value?
Cap rate is the buyer’s required yield. When buyers accept a lower yield — typically for prime, low-risk properties in strong markets — they pay more per dollar of income, so value rises. Dividing by a smaller number gives a bigger result.
What counts in NOI?
Net operating income is gross income minus vacancy and operating expenses — taxes, insurance, management, maintenance — but before mortgage payments, income tax and depreciation. Use the vacancy & operating expense NOI calculator to build it.
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Educational estimate, not financial, tax or lending advice. Confirm figures with your lender, agent or a qualified professional.