{
  "slug": "cap-rate",
  "title": "Cap Rate Calculator",
  "heading": "Cap Rate Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/cap-rate",
  "summary": "Net operating income over value — the property comparison metric.",
  "description": "Cap rate strips out financing so two properties can be compared on operating performance alone. It also works in reverse: divide NOI by a target cap rate to value a building.",
  "formula": "Cap rate = Net operating income ÷ Property value. Value = NOI ÷ Cap rate.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=cap-rate",
  "inputs": [
    {
      "id": "income",
      "label": "Gross annual income",
      "kind": "number",
      "hint": null,
      "default": 96000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "vacancyPct",
      "label": "Vacancy",
      "kind": "number",
      "hint": null,
      "default": 5,
      "unit": "%",
      "min": 0,
      "max": 50
    },
    {
      "id": "expenses",
      "label": "Annual operating expenses",
      "kind": "number",
      "hint": null,
      "default": 34000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "value",
      "label": "Property value",
      "kind": "number",
      "hint": null,
      "default": 780000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "targetCap",
      "label": "Target cap rate",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": "%",
      "min": 0.5,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "capRate",
      "label": "Cap rate",
      "format": "percent",
      "hint": null,
      "primary": true
    },
    {
      "id": "noi",
      "label": "Net operating income",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "effective",
      "label": "Effective gross income",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "valueAtTarget",
      "label": "Value at your target cap rate",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "expenseRatio",
      "label": "Operating expense ratio",
      "format": "percent",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Gross annual income: 96000 $",
      "Vacancy: 5 %",
      "Annual operating expenses: 34000 $",
      "Property value: 780000 $",
      "Target cap rate: 7 %"
    ],
    "outputs": [
      "Cap rate: 7.33%",
      "Net operating income: $57,200.00",
      "Effective gross income: $91,200.00",
      "Value at your target cap rate: $817,142.86",
      "Operating expense ratio: 37.3%"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter gross annual income ($).",
      "Enter vacancy (%).",
      "Enter annual operating expenses ($).",
      "Enter property value ($).",
      "Enter target cap rate (%).",
      "Read your cap rate on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "income": 58000,
        "vacancyPct": 3,
        "expenses": 20500,
        "value": 470000,
        "targetCap": 4.2
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "income": 96000,
        "vacancyPct": 5,
        "expenses": 34000,
        "value": 780000,
        "targetCap": 7
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "income": 154000,
        "vacancyPct": 8,
        "expenses": 54500,
        "value": 1250000,
        "targetCap": 11.200000000000001
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "How does the cap rate calculator work?",
      "a": "Cap rate strips out financing so two properties can be compared on operating performance alone. It also works in reverse: divide NOI by a target cap rate to value a building. The underlying maths is: Cap rate = Net operating income ÷ Property value. Value = NOI ÷ Cap rate."
    },
    {
      "q": "What do I need to enter?",
      "a": "5 values: gross annual income, vacancy, annual operating expenses, property value, and target cap rate. Each field starts with a sensible default, so you can change one number at a time and watch the result move."
    },
    {
      "q": "What does the cap rate result mean?",
      "a": "It is returned as a percentage and updates live as you edit the inputs, so you can compare two or three versions of a scenario in a few seconds."
    },
    {
      "q": "Is this calculator free, and do I need an account?",
      "a": "Yes, it's free, and no account is required. Nothing you type is stored on our servers — the maths runs entirely in your browser."
    },
    {
      "q": "How accurate is the result?",
      "a": "It applies the standard formula exactly, so the arithmetic is precise. Results are estimates before tax, fees, and inflation unless an input explicitly covers them."
    },
    {
      "q": "Who is this tool for?",
      "a": "It's built for anyone comparing money scenarios before committing — budgeting a payment, sanity-checking a quote, or seeing what a change in rate or term actually costs."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/rental-property-cash-flow",
    "https://www.revenuelab.fyi/toolbox/roi"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Cap Rate Calculator (https://www.revenuelab.fyi/toolbox/cap-rate)"
}