Value from cap rate.

Not financial advice. This is an estimating tool built on the numbers you enter. Real estate returns depend on assumptions that can be wrong; check them with a lender, an accountant and local sources before you buy.

Worked example

NOI of $30,000 at a 6% cap rate: $30,000 / 0.06 = $500,000.00. At 5.5% the value is $545,454.55; at 6.5% it is $461,538.46. An asking price of $520,000 equals a 5.77% cap rate, which is $20,000.00 above the 6% value.

How it works

Value = annual NOI / cap rate. Sensitivity values use the cap rate minus and plus the step. Asking cap rate = NOI / asking price. A lower cap rate gives a higher value, so small changes in the cap rate you choose move the answer a lot.

Sources and basis

Corporate Finance Institute states that dividing NOI by the prevailing cap rate for a property class and geography gives an estimate of fair market value. Wikipedia defines the cap rate as annual net operating income divided by current value.

• NOI (Net Operating Income) (Corporate Finance Institute, published Feb 5, 2020), opened 2026-10-08.
• Capitalization rate (Wikipedia), opened 2026-10-08.

FAQ

How do you value a property using cap rate?

Divide annual NOI by the cap rate as a decimal. $30,000 / 0.06 = $500,000.00.

Where do I get the cap rate?

From recent sales of comparable properties in the same area: each sale’s NOI divided by its price. Do not use another market’s cap rate.

Why does a small cap rate change move the value so much?

Because value is the inverse of the cap rate. In the example half a point changes value by about $45,455 to $38,462.

Should NOI include the mortgage?

No. NOI is before debt service, so value does not depend on how the buyer finances the purchase.

Is this an appraisal?

No. It is a quick estimate using one method. Appraisers also use sales comparison and cost approaches.