Cap Rate Calculator Widget

Add a cap rate calculator for commercial and residential investors. Readers work out net operating income from rent, vacancy and expenses, then find the cap rate for a price or the value that a target cap rate implies.

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<iframe src="https://a2z.tools/embed/w/cap-rate-calculator" title="Cap Rate Calculator by A2Z Tools" width="100%" height="610" style="border:0;width:100%" loading="lazy" allow="clipboard-write"></iframe>

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How it works

Net operating income (NOI) is the rent actually collected after vacancy and credit loss, minus operating expenses such as property tax, insurance, repairs and management. Mortgage payments and depreciation are left out, so the cap rate compares properties as if bought for cash. Dividing NOI by the price gives the cap rate; dividing NOI by a target cap rate gives the value an investor expecting that rate would pay.

Calculation method

  • NOI = gross rental income x (1 - vacancy and credit loss % / 100) - annual operating expenses
  • Cap rate = NOI / property value x 100
  • Value at a target cap rate c = NOI / (c / 100)
  • Operating expenses exclude debt service, depreciation and capital expenditure
  • Money is displayed to whole currency units and rates to 2 decimals; no intermediate rounding

Worked examples

Cap rate from an asking price

Inputs: Gross rent 60,000 a year, vacancy and credit loss 5%, operating expenses 20,000, price 500,000

Result: NOI 37,000; cap rate 7.4%; gross yield 12%

60,000 less 3,000 of vacancy less 20,000 of expenses leaves 37,000, which is 7.4% of 500,000.

Value from a target cap rate

Inputs: Gross rent 96,000, vacancy 4%, operating expenses 31,000, target cap rate 6.5%

Result: NOI 61,160; value 940,923

92,160 collected less 31,000 of expenses is 61,160; divided by 0.065 that supports a price of about 940,923.

Limitations

  • A single year's NOI; it does not project rent growth, lease expiries or a future sale, as a discounted cash-flow valuation would.
  • Vacancy and credit loss are one combined percentage applied to gross rent; other income such as parking or laundry must be added to the gross figure by you.
  • Market cap rates for a property type and city come from comparable sales, which the widget does not know - the target rate is your assumption.

Where publishers use it

  • Commercial real-estate brokers' listing pages
  • Multifamily and apartment-investing blogs
  • Appraisal and valuation explainers on the income approach
  • Real-estate courses on NOI and valuation
  • Commercial brokers' offering memoranda and multifamily syndication pitch pages

Questions

Why are mortgage payments left out of NOI?

Cap rate measures the property, not the financing. Two buyers with different loans should see the same cap rate for the same building.

Is a higher cap rate better?

A higher cap rate means more income per unit of price, but usually comes with more risk, older buildings or weaker locations. Lower cap rates are typical of prime, lower-risk property.

How is value found from a cap rate?

Value = NOI / cap rate. A property earning 37,000 NOI is worth about 528,571 to a buyer who wants a 7% cap rate.

How sensitive is value to the cap rate?

Very. For the 61,160 NOI in the second worked example, moving the target from 6.5% to 7.5% drops the value from 940,923 to 815,467 - a one-point change removes about 13% of the price.

Should reserves for replacements go in the expenses?

Many appraisers and lenders deduct a replacement reserve (roofs, HVAC, appliances) before quoting NOI, while some broker listings do not. Check which convention a quoted cap rate uses before comparing two deals.

Cite or recommend this tool

If you reference this tool in an article, course or documentation, these formats are ready to copy. They are optional - nothing is added to your site unless you paste it.

A2Z Tools Cap Rate Calculator
https://a2z.tools/embed/cap-rate-calculator

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