Free tool
NOI and cap rate calculator
Net operating income drives value. Walk it from gross potential rent down to NOI, then see the cap rate or what the building is worth at the cap rate you choose.
How it works
Gross potential rent is units times average monthly rent times 12. Vacancy and credit loss comes off that as a percentage. Other income, such as fees, parking, laundry and pet rent, is added back. The result is effective gross income.
Net operating income is effective gross income minus operating expenses. Operating expenses are the costs of running the property, such as payroll, repairs, utilities, insurance and taxes. Debt payments and capital spending are not included.
The cap rate is NOI divided by property value. If you leave the value blank, the calculator works the other way and shows the value implied by the cap rate you enter, which is NOI divided by the cap rate. The expense ratio is operating expenses divided by effective gross income.
Frequently Asked Questions
What is included in operating expenses?
Include the ongoing costs of running the property: payroll, repairs and maintenance, turnover costs, utilities, insurance, property taxes, management fees and marketing. Leave out mortgage payments, depreciation and capital improvements.
What is a cap rate?
The capitalization rate is NOI divided by property value. It is a quick way to compare what different properties earn relative to their price. Cap rates vary by market, location and asset class.
Should I use the rent roll or market rent?
For the property you run today, use the average of the rents actually in place. For a buyer or an underwriting exercise, you may test market rent as well. Run the calculator both ways to see the gap.
Why does the calculator show an implied value?
Many owners and asset managers think in reverse: given the NOI and the cap rate buyers are paying in the market, what is the property worth? Enter a cap rate and leave the value blank to see that number.
Is this a valuation?
No. It is an estimate from the figures you enter. An appraisal or broker opinion of value looks at much more than one cap rate.
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