California Cap Rate Calculator
Calculate California commercial real estate capitalization rates from NOI and valuation. Benchmark against Los Angeles, Bay Area, Inland Empire, and San Diego regional hurdles.
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How it works
Follow the underwriting path lenders use: input the deal, apply constraints, then read the result.
Enter California property NOI and price
Start with stabilized Net Operating Income recast for California Proposition 13 post-acquisition property tax reassessment (typically 1.10% to 1.25% of purchase price).
California Cap Rate & Low-Cap Squeeze Formula
Capitalization rate equals annual underwritten NOI divided by purchase price. In low-cap coastal California markets, lenders enforcing an 8.5% to 10.0% minimum debt yield frequently restrict borrowing to 50%–60% LTV rather than the expected 75% ceiling.
Read the calculation methodology and limitations.
Cap Rate = Underwritten NOI / Purchase Price
Implied Value = Underwritten NOI / Target Market Cap Rate
Debt Yield Constraint = Underwritten NOI / Loan Amount
Maximum LTV by Debt Yield = Cap Rate / Minimum Debt Yield HurdleA Los Angeles multifamily property with $480,000 NOI at a $10,000,000 valuation produces a 4.80% cap rate. At an 8.50% lender debt yield floor, maximum loan proceeds are $5,647,058, restricting effective leverage to 56.47% LTV.
See This Calculator in Action
Explore institutional underwriting examples. Load any scenario into the live calculator with one click to customize rates, amortization, and property valuation.
Industrial 6.75% cap
Cap Rate = Underwritten NOI / Purchase PriceThe cap rate explains asset pricing, while the optional loan amount shows lender metrics like LTV and debt yield.
Underwriting Metric Comparison & Lender Sizing Standards
Compare debt yield against DSCR and LTV constraints, and review typical sizing assumptions across lender types.
Cap Rate vs Credit Metrics
3 Core Sizing TestsProperty valuePricing and valuation
Loan amountLender income cushion
Property valueCollateral leverage
| Metric | Denominator | Used For |
|---|---|---|
| Cap Rate | Property value | Pricing and valuation |
| Debt Yield | Loan amount | Lender income cushion |
| LTV | Property value | Collateral leverage |
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Inland Empire Logistics | $950,000 NOI / $20,000,000 price | 4.75% cap rate |
| Westside LA Multifamily | $520,000 NOI / $11,000,000 price | 4.73% cap rate |
| Orange County Retail | $720,000 NOI / $12,500,000 price | 5.76% cap rate |
Conversion reference
| California MSA | Multifamily (Class A/B) | Industrial / Last-Mile | Anchored Retail |
|---|---|---|---|
| Greater Los Angeles | 4.50% – 5.25% | 4.25% – 4.90% | 5.50% – 6.25% |
| Orange County | 4.40% – 5.10% | 4.20% – 4.80% | 5.25% – 6.00% |
| Inland Empire | 5.25% – 5.90% | 4.75% – 5.40% | 6.00% – 6.75% |
| San Diego County | 4.60% – 5.35% | 4.50% – 5.10% | 5.50% – 6.25% |
| San Francisco Bay Area | 4.50% – 5.40% | 4.40% – 5.10% | 5.50% – 6.35% |
Quick facts
- California commercial cap rates are among the most compressed in the nation (4.25%–5.50%).
- Underwritten NOI must pro-forma Proposition 13 reassessment based on purchase price.
- Compressed coastal cap rates frequently trigger debt yield limits, forcing higher equity injections.
- Industrial distribution assets in the Inland Empire and South Bay trade at the lowest yields statewide.
Editorial Team
Commercial Real Estate Finance Reviewers
- Calculations reviewed against standard CRE lending formulas for DSCR, LTV, cap rate, and debt yield
- Methodology cross-checked against lender-style loan sizing using NOI, value, loan constant, DSCR, LTV, and debt yield
Our editorial team builds and reviews commercial real estate finance calculators around the way lenders actually size debt: property income, collateral value, annual debt service, and lender risk thresholds. Results are educational screening estimates, not loan quotes, tax advice, legal advice, or a commitment to lend.
Methodology: formulas are calculated from borrower-entered inputs using standard CRE underwriting relationships for NOI, debt yield, DSCR, LTV, cap rate, loan constant, and maximum loan proceeds.
Reviewer note: pages are reviewed for formula accuracy and updated when lender benchmarks or site methodology changes.
Disclaimer: results are educational estimates only and are not financial, legal, tax, valuation, or lending advice.
Frequently asked questions
California commercial cap rates average 4.50% to 5.25% for multifamily and prime industrial logistics, 5.50% to 6.25% for anchored grocery retail, and 7.50% to 9.00%+ for suburban office.
Proposition 13 limits assessed value increases to 2% annually until ownership transfers. Upon sale, the county assessor reassesses the property to current market value (usually the purchase price), causing property tax expenses to jump significantly and reducing underwritten NOI.
Because Debt Yield equals Cap Rate divided by LTV. When a California property trades at a 4.75% cap rate and the lender requires an 8.50% minimum debt yield, the maximum supported LTV is 4.75% ÷ 8.50% = 55.88% LTV.