Free calculator
Cap rate calculator
A capitalization rate divides a property’s net operating income by its value, giving the unlevered yield a buyer earns at that price. The same equation runs in three directions: the cap rate a price implies, the value a given income supports at a target cap rate, and the income a price would need to hit that rate. This calculator returns all three from the income, the price and a target rate you enter.
- 20,000+loan programs screened
- 5–8matches on a typical deal
- under an hourto the median first offer
- Zero upfrontto submit and compare offers
How is a cap rate calculated?
Cap rate = NOI ÷ Property value
Value = NOI ÷ Cap rate
NOI = Value × Cap rate
What does the calculation look like on a real deal?
| Input | Value |
|---|---|
| Net operating income | $215,000 |
| Price or value | $3,000,000 |
| Target cap rate | 6.50% |
- Cap rate: $215,000 ÷ $3,000,000 = 7.17%.
- Value the same income supports at a 6.50% cap rate: $215,000 ÷ 0.065 = $3,307,692.
- Income a $3,000,000 price would need at 6.50%: $3,000,000 × 0.065 = $195,000.
Cap rate at this price7.17%
At $3,000,000 the income yields 7.17%. If comparable sales are trading at 6.50%, the same income supports a price about $307,000 higher — which is the gap a seller will point to and a lender’s appraiser will test.
How do you read the result?
A higher cap rate means a lower price for the same income: more yield, and usually more perceived risk. A lower cap rate means buyers are paying up, either because the income is expected to grow or because the asset and its tenants are considered safe. Neither is good or bad on its own; the question is whether the rate matches what comparable properties in the same submarket actually traded at.
For a loan, the cap rate sets the value the leverage cap is applied to. An appraiser who uses a higher rate than the buyer paid produces a lower value, and a lower value shrinks the loan — which is why the spread between the going-in cap rate and the appraiser’s rate is worth knowing before the term sheet, not after.
Which NOI goes into a cap rate?
The trailing twelve months for a stabilised property; a projected stabilised year for one still leasing up. Buyers quote going-in cap rates on current income and lenders underwrite on normalised income, so the two rates can differ for the same building. Whichever you use, keep it consistent across the comparables or the comparison means nothing.
How does the cap rate connect to the loan?
Two ways. The value it implies is what the loan-to-value cap is applied to, so it sizes the leverage leg directly. And the spread between the cap rate and the loan’s mortgage constant decides whether borrowing helps: when the property yields more than the debt costs, leverage raises the cash return; when it yields less, every borrowed dollar dilutes it. Run the constant on the loan sizing page and compare the two.
What happens after you have the number?
A ratio tells you where the deal stands; it does not tell you which lender will like it. You describe the deal once — about five minutes — and it is screened against 20,000+ loan programs. Most deals return 5–8 matches, the median first offer arrives in under an hour, and there is Zero upfront; the fee is 0.50–1.00%, paid only at closing.
YieldStack is a commercial mortgage brokerage, not a lender. The rate, the leverage and the credit decision belong to the lenders competing for your deal; our job is making sure the right ones see it at the same time, so the terms you compare are real competition rather than one desk’s appetite.
Frequently Asked Questions
Is a higher cap rate better?
For a buyer, a higher rate means more income per dollar paid, so yes on yield alone; the market usually prices that yield in for a reason — older asset, weaker tenant, softer submarket. For a seller or a refinancing owner, a lower rate means a higher value and a larger loan.
Does the cap rate include the mortgage?
No. It is an unlevered measure — income before debt service divided by value — which is what lets buyers compare properties regardless of how each is financed. Cash-on-cash return is the levered equivalent.
What cap rate should I use to value my property?
The rate comparable properties recently sold at in the same submarket, adjusted for age, tenancy and condition. An appraiser will do the same exercise; a broker’s opinion of value is a useful early read. This calculator takes whatever rate you enter and shows the value it implies.
Why does my lender’s value differ from my purchase price?
The appraisal applies its own cap rate to its own normalised NOI. If either is more conservative than yours, the value falls and the leverage cap yields a smaller loan. Ask for the appraiser’s rate and income early so a gap shows up before closing costs are spent.
Is YieldStack a lender?
No. YieldStack is a commercial mortgage brokerage, not a lender. Every term sheet comes from a lender in the network and is subject to that lender's underwriting.
Does it cost anything to see terms?
No. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Is financing guaranteed?
No. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Where does YieldStack operate?
Nationwide. YieldStack arranges commercial real estate financing nationwide. Every deal is business-purpose commercial financing, and the broker fee is paid only at closing.
You have the number.Now get the quotes.
YieldStack is a commercial mortgage brokerage, not a lender.