Cap Rate Calculator
Calculate cap rate from NOI and property value, then compare implied valuation, LTV, and debt yield when a loan amount is included.
Last updated:
How it works
Follow the underwriting path lenders use: input the deal, apply constraints, then read the result.
Enter NOI and value
Cap rate starts with the asset's annual net operating income and current value or purchase price.
Cap Rate Formula
Cap rate measures unlevered property yield. It is an asset valuation metric, while debt yield is a credit metric that replaces value with loan amount.
Last reviewed by Commercial Real Estate Finance Reviewers on .
Cap Rate = NOI / Property Value
Implied Value = NOI / Market Cap Rate
Debt Yield = NOI / Loan Amount$800,000 NOI on a $10,000,000 price equals an 8.00% cap rate. If the loan is $7,000,000, debt yield is 11.43%.
See This Calculator in Action
Start with a lender-style example, then adjust the calculator inputs for your deal.
Acquisition valuation check
Industrial 6.75% cap
- NOI: $1,080,000
- Property value: $16,000,000
- Loan amount: $10,500,000
The cap rate explains asset pricing, while the optional loan amount shows lender metrics like LTV and debt yield.
Cap Rate vs Credit Metrics
| 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 |
|---|---|---|
| Industrial acquisition | $1,100,000 NOI / $16,000,000 price | 6.88% cap rate |
| Value sensitivity | $900,000 NOI / 7.00% market cap | $12,857,143 implied value |
| Credit comparison | $900,000 NOI / $9,000,000 loan | 10.00% debt yield |
Conversion reference
| Metric | Formula | Primary Use |
|---|---|---|
| Cap Rate | NOI / Value | Asset pricing and valuation |
| Debt Yield | NOI / Loan | Lender income cushion |
| LTV | Loan / Value | Collateral leverage |
| DSCR | NOI / Debt Service | Payment coverage |
Quick facts
- Cap rate uses property value; debt yield uses loan amount.
- A lower cap rate implies a higher value for the same NOI.
- Cap rate does not include financing costs or amortization.
- Lenders may still reduce proceeds when cap rate supports value but DSCR or debt yield is weak.
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
Divide annual net operating income by property value or purchase price, then express the result as a percentage.
Cap rate divides NOI by value and helps price the asset. Debt yield divides NOI by loan amount and helps lenders measure credit risk.
Indirectly. Cap rate supports a value estimate, but lenders still size the loan with LTV, DSCR, and debt yield.