Cap rate calculator

Cap Rate Calculator: NOI, Yield and Implied Value

Build NOI line by line, see the cap rate the price implies, and compare it to the value your target cap rate supports. Figures are illustrative estimates, not an appraisal or an offer of credit.
Quick answer

How does the Cap Rate calculator work?

Free cap rate calculator for rental and multifamily property. Calculate NOI, cap rate, implied value at a target cap, GRM, and expense ratio in one place. Final eligibility, pricing, and terms are subject to a complete application, credit and property review, and full underwriting.

Key takeaways
  • Free cap rate calculator for rental and multifamily property.
  • Calculate NOI, cap rate, implied value at a target cap, GRM, and expense ratio in one place.
  • Every figure shown is an estimate for business-purpose investment property financing only — not an offer or commitment to lend.
  • Simply Approved Mortgages is a licensed mortgage broker (NMLS #2620881), licensed for residential lending in Florida and Colorado and arranging business-purpose investor loans across our approved 37-jurisdiction footprint.

1. Price & income

2. Operating expenses

3. Target cap rate

How cap rate actually gets used

Cap rate is a pricing language, not a return target. Here is how investors and lenders read it.

Pricing. Small multifamily and commercial assets are quoted on cap rate because it strips out financing. If comparable stabilized duplexes in the submarket trade at a 7% cap and the NOI is $29,750, the income supports roughly $425,000 — regardless of what any single buyer's loan looks like.

Value-add. The gap between the in-place cap rate and the stabilized cap rate is the business plan. Raise NOI by $6,000 a year in a 7% cap market and you have created roughly $85,000 of value, which is exactly the math behind a BRRRR refinance.

What breaks it. Understated taxes at the reassessed value, an insurance quote from before the last hard-market cycle, no capex reserve, and self-management priced at zero. Strip those four shortcuts out and most "9% cap" listings underwrite closer to 6%.

Where DSCR fits. Cap rate values the asset; DSCR decides the loan. A property can price well on cap rate and still miss a lender's minimum DSCR once the payment is included — run the DSCR calculator before you write the offer.

Live pricing · DSCR

Current DSCR pricing for income-qualified rentals

Pricing responses returned for a sample business-purpose DSCR scenario on non-owner-occupied investment property, including rate, points or lender credit, and estimated principal and interest from the same quote. Pricing changes intraday and is not a loan approval, commitment, or guarantee of financing.

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Scheduled rate refresh: 11:30 AM and 5:00 PM ET each business dayPricing is refreshed on a schedule (11:30 AM and 5:00 PM ET each business day) and can change between refreshes.View 30/90-day rate history
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Get My Live DSCR Rates

The three cards above are featured examples from the current snapshot. Enter your own property, credit tier, leverage and rent to see every eligible option for your deal.

Rate & Pricing Disclosure: This quote is an indication for the scenario entered and the pricing available at the time shown. Rates and terms are subject to change without notice and may change or may not be available at commitment or closing. This is not a rate lock, loan approval, commitment to lend or offer of credit. APR reflects applicable borrower-paid finance charges and pricing credits for this quote and may be the APR returned with the quote or our own audited calculation where verified borrower-paid finance charges outside the quoted price apply. Additional lender and third-party costs may apply and may not be included in the APR. Payment shown is principal and interest only and excludes taxes, insurance, HOA dues and other applicable costs, so your actual payment will be higher. Simply Approved Mortgages LLC is a mortgage broker, not the funding lender. Business-purpose, non-owner-occupied investment property only. Equal Housing Opportunity.

APR reflects applicable borrower-paid finance charges and pricing credits for this quote. Depending on the option, the APR shown is either the APR returned with that quote or our own audited calculation, used where verified borrower-paid finance charges outside the quoted price apply. Other lender and third-party costs may apply and may not be included in the APR.

Estimated payment is principal and interest only and does not include property taxes, insurance, HOA dues, flood insurance, escrows or other applicable costs.

Cap rate FAQ

Straight answers on NOI, yield, and valuation.

What is cap rate in real estate?

Capitalization rate is net operating income divided by property value or purchase price. NOI excludes financing and income taxes, so cap rate measures the unlevered yield of the asset itself — it lets you compare two properties regardless of how each one is financed.

What is a good cap rate for a rental property?

It is market-specific. Stabilized single-family and small multifamily rentals in the Southeast and Midwest markets we lend in commonly trade in the 5%–8% band, while higher-cost coastal metros trade lower because buyers are paying for appreciation and liquidity. A cap rate is only meaningful against comparable sales in the same submarket and asset class.

Does cap rate include the mortgage payment?

No. Cap rate deliberately excludes debt service. If you want a levered return figure, use cash-on-cash return, which divides annual pre-tax cash flow after the loan payment by the cash you invested.

How do I calculate NOI?

NOI = gross scheduled rent and other income, minus vacancy loss, minus operating expenses (property taxes, insurance, management, maintenance and reserves, HOA, utilities you pay, and turnover). Mortgage principal and interest, depreciation, and capital improvements are excluded from NOI.

What is reverse cap rate valuation?

If you know the NOI and the market cap rate, value = NOI ÷ cap rate. Investors use this to price small multifamily and to test whether a listed price is supported by income. This calculator shows the implied value at your target cap rate next to the price you entered.

How does cap rate relate to property value trends?

Cap rates and prices move inversely when NOI is held constant — as buyers accept lower cap rates, they are paying more per dollar of income, and as cap rates rise, values compress. Watching cap rate trends in a submarket over several quarters can signal whether pricing is expanding or contracting relative to rents.

What is a cap rate spread and why does it matter to investors?

The cap rate spread is the gap between the property's cap rate and current borrowing costs; a wider positive spread generally means leverage adds to your cash-on-cash return, while a negative spread means debt drags on it. Investors evaluating a DSCR purchase often check this spread before deciding how much leverage to use.

Does deferred maintenance affect cap rate?

Deferred maintenance does not change the formula, but buyers typically underwrite a higher cap rate on properties needing near-term capital work to compensate for the added cost and risk, which effectively lowers the price they will pay for the same NOI. Sellers who address major deferred items before listing often support a lower, more favorable cap rate.

How do I use cap rate to compare markets?

Compare cap rates only within similar asset classes and property conditions, since a 6% cap rate in one metro may reflect different risk and growth assumptions than a 6% cap rate elsewhere. Pair the cap rate with rent growth trends, vacancy rates, and property tax trajectories in each market for a fuller comparison.

What is the relationship between cap rate and DSCR?

Cap rate measures unlevered yield on the purchase price, while DSCR measures whether in-place or projected rent covers the proposed loan payment. A property can have an attractive cap rate but still fail a DSCR loan's minimum ratio if the purchase price and financing terms push the payment too high relative to rent.

Should I use in-place rent or market rent when calculating cap rate on a purchase?

Use in-place, actual trailing rent and expenses for the most defensible cap rate at acquisition, and calculate a separate pro-forma cap rate using market rent as a forward-looking scenario. Lenders and appraisers generally weight actual trailing income more heavily than optimistic pro-forma projections.

Why do cap rates differ between single-family rentals and small multifamily?

Small multifamily properties often trade at higher cap rates than comparable single-family rentals because they carry more operating complexity, higher turnover exposure, and a smaller buyer pool of qualified investors. This calculator's inputs work for either property type as long as your income and expense figures reflect the specific asset.

Financing for income-qualified property

Send us the NOI and we'll return an illustrative DSCR structure for the asset — business-purpose, non-owner-occupied investment property only.

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How We Evaluate This Scenario

A DSCR file is judged on the property, not your tax returns: qualifying rent divided by PITIA — principal, interest, taxes, insurance, plus HOA and flood where they apply. Most programs use the lesser of the in-place lease rent and the appraiser's market rent, so a lease signed below market usually caps the ratio no matter how strong the comps look.

Three inputs move the outcome more than anything else: rent support on the appraiser's rent schedule (Form 1007 or 1025), the LTV tier, and the credit tier. Dropping leverage by five points or moving up a FICO band frequently changes pricing more than shopping a different lender does.

Before you write an offer, price taxes and insurance at post-sale levels rather than the seller's current bill. In reassess-on-transfer states and in coastal insurance markets, that single adjustment is the most common reason a deal that penciled at contract fails the ratio at underwriting.

Reviewed by Simply Approved Mortgages · NMLS #2620881. Business-purpose investor lending only.

Investor pre-approval

Get your personalized investor loan quote

Pick the loan type that fits your deal and complete a short, tailored pre-qualification. A licensed loan officer follows up with an initial scenario review once we have your credit authorization and supporting documents — usually the same business day. Formal pricing and terms follow underwriting.

Pick a loan type

You can change this any time.

Tell us about your scenario

The form below is tailored to DSCR rental loan — only the questions your program needs.

1
Your info
2
Your deal
Your deal — the basics

Purchase or refinance a rental. The property's rent qualifies the loan.

What's your goal?
Purchase price ($)$450,000
$
Down payment (%)20%
%
Monthly rent ($)$2,800
$
HUD Fair Market Rent for your ZIP — ballpark only. Get a precise market rent after you submit.
Estimated credit rating

A soft self-estimate — no credit pull happens here.

This is a pre-qualification request — not a loan application under TILA/RESPA and not a loan approval, rate lock, offer, or commitment to lend. It does not trigger a Loan Estimate. If your loan requires one, the Loan Estimate is issued inside our loan origination system after you submit a complete application and your loan officer has reviewed your scenario.

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Your answers save as you go. A licensed loan officer typically follows up the same business day · Simply Approved Mortgages LLC, NMLS #2620881.

Credit & pre-approval

Why we pull credit for your investor loan pre-approval

Every DSCR / business-purpose loan file needs a tri-merge credit report so we can verify identity, price your rate tier accurately, and confirm reserves and payment history for the underwriter. Cleaner credit typically unlocks a better rate and higher leverage.

Pay for your credit report — SmartPay

Simply Approved Mortgages uses MeridianLink SmartPay to securely collect the credit report fee for your investor pre-approval. Payment goes directly to the credit vendor — not to us — and unlocks your tri-merge report (Equifax, Experian, TransUnion) so your loan officer can price your file.

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  • Required for a formal investor pre-approval decision
  • Soft-touch process — your loan officer will guide you through it
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