Investor Tools
Cap Rate Calculator
Calculate capitalization rate, implied value, or required NOI for any commercial real estate investment — with a ±75 bps cap-rate sensitivity table, optional price-per-SF math, and a 2026 Florida cap rate reference by asset class.
Solve for…
Enter NOI + purchase price below — the third number is calculated for you.
Cap Rate
6.25%
$125,000 ÷ $2,000,000 = 6.25%
NOI multiple
16.0×
price ÷ annual NOI (= 1 ÷ cap rate) — years of NOI to recoup the price, before rent growth
Monthly NOI
$10,417
annual NOI ÷ 12 — net income before debt service
Price per SF
—
add building SF above to see per-SF pricing
What this means
A 6.25% cap rate means buyers are paying 16.0× annual NOI — every $100,000 of price produces $6,250 of net income per year. A lower cap rate = richer pricing per dollar of income (typically lower perceived risk); a higher cap rate = more yield demanded as compensation for risk.
Cap Rate Sensitivity
Value of the same $125,000 NOI if the applied cap rate moves ±75 bps — small cap moves swing price a lot.
| Cap Rate | Implied Value | Δ vs applied | Δ % |
|---|---|---|---|
| 5.50%-75 bps | $2,272,727 | +$272,727 | +13.6% |
| 5.75%-50 bps | $2,173,913 | +$173,913 | +8.7% |
| 6.00%-25 bps | $2,083,333 | +$83,333 | +4.2% |
| 6.25%applied | $2,000,000 | — | — |
| 6.50%+25 bps | $1,923,077 | −$76,923 | −3.8% |
| 6.75%+50 bps | $1,851,852 | −$148,148 | −7.4% |
| 7.00%+75 bps | $1,785,714 | −$214,286 | −10.7% |
Pure arithmetic on your inputs — not a prediction of where cap rates will move.
2026 Florida Cap Rate Reference
Highlighted rows: asset types whose typical range brackets your 6.25% applied cap rate.
| Asset Type | Typical Cap Rate |
|---|---|
| Chick-fil-A (ground lease) | 3.75% - 4.75% |
| McDonald's (ground lease) | 4.50% - 5.25% |
| Starbucks NNN | 4.75% - 5.50% |
| AutoZone / O'Reilly NNN | 5.25% - 6.00% |
| CVS Pharmacy | 5.50% - 6.50% |
| Dollar General NNN | 5.75% - 6.50% |
| Walgreens Pharmacy | 6.00% - 7.00% |
| Family Dollar NNN | 6.00% - 6.75% |
| Multifamily Class A | 5.00% - 5.75% |
| Industrial / Warehouse | 5.50% - 6.50% |
| Retail Shopping Center | 6.50% - 7.50% |
| Suburban Office | 7.00% - 8.50% |
| Medical Office Building | 6.00% - 6.75% |
Estimates only — for informational and educational use. Not investment, tax, legal, or accounting advice. Outputs depend entirely on the inputs you provide and are not a guarantee of future performance. Verify any deal with your CPA, attorney, and lender. See our Terms of Service.
Investment Math
Cap Rate Math Explained
What Is a Cap Rate?
Capitalization rate (cap rate) is the ratio of a property's Net Operating Income (NOI) to its purchase price or current value. It's the most widely used metric for comparing commercial real estate investments — essentially the unlevered yield of the property.
Cap Rate = NOI ÷ Purchase PriceWorked example
A property producing $150,000 of NOI and listed at $2,400,000 is priced at a 6.25% cap ($150,000 ÷ $2,400,000). The same NOI at a 6.00% cap supports $2,500,000 (+$100,000); at a 6.50% cap it supports $2,307,692 (−$92,308). Small cap-rate moves swing value materially — the calculator's sensitivity table shows this for your own numbers at ±25, ±50, and ±75 bps.
How to Use Cap Rates
Compare Properties
At the same cap rate, two properties with similar NOIs should trade at similar prices. Different cap rates reflect perceived risk, location quality, tenant credit, and lease term.
Estimate Value from NOI
If you know a property's NOI and the typical cap rate for its asset class, you can estimate value. This is how appraisers apply the 'income approach' to valuation.
Set an Offer Price
Divide the NOI by your target cap rate to determine your maximum offer price. If market cap rates are 6.0% and NOI is $120K, offer no more than $2M.
Understand Market Dynamics
Cap rates move inversely with prices. When cap rates compress (go down), prices rise. When cap rates expand (go up), prices fall. Interest rates, tenant demand, and investor sentiment drive cap rate movement.
Cap Rate Limitations
Cap rate is a snapshot — it doesn't account for future rent growth, leverage, tax benefits, tenant credit changes, or capital expenditures. Always combine cap rate analysis with cash-on-cash return, DSCR, IRR projections, and tenant credit analysis for a complete picture.
Cap Rate FAQs
How do you calculate a cap rate?
Divide the property's annual net operating income (NOI) by its purchase price. Example: $125,000 NOI ÷ $2,000,000 price = 6.25% cap rate. NOI is income after operating expenses but before mortgage payments.
What does a lower cap rate mean?
A lower cap rate means buyers are paying more for each dollar of income — richer pricing that typically reflects lower perceived risk, such as stronger tenant credit, a longer lease term, or a better location. A higher cap rate means buyers are demanding more yield as compensation for risk.
Does the cap rate include mortgage payments?
No. Cap rate is an unlevered metric — NOI is calculated before debt service, so the cap rate is the same regardless of how the purchase is financed. To measure returns with financing in place, use cash-on-cash return and DSCR alongside cap rate.
What is a good cap rate for commercial real estate?
There is no single "good" cap rate — it depends on asset type, tenant credit, lease term, and location. Compare a deal against typical ranges for its asset class, like the Florida reference table in the calculator above, rather than against a universal number.
What is the difference between cap rate and cash-on-cash return?
Cap rate is unlevered: annual NOI divided by purchase price, ignoring financing. Cash-on-cash return is levered: annual pre-tax cash flow after debt service divided by the actual cash you invested. Cap rate is best for comparing properties; cash-on-cash measures how your equity performs.
Ready for a Full Deal Analysis?
Cap rate is just the start. Use our Deal Analyzer for a complete institutional-grade underwriting with IRR, DSCR, cash-on-cash, and sensitivity analysis.
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