Calculate capitalization rate, estimate property value from NOI, or find the NOI needed to hit your target cap rate. The essential CRE investment metric.
Three calculation modes for any scenario
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Get Pre-Assessed Free →The capitalization rate is the most fundamental metric in commercial real estate investing.
Cap rate represents the unlevered return on a property — the annual yield you'd earn if you paid all cash with no mortgage. It lets you compare properties regardless of financing structure, size, or location on an apples-to-apples basis.
Higher cap rates (7–10%+) mean higher returns but usually higher risk — secondary markets, older buildings, shorter leases. Lower cap rates (4–6%) indicate prime locations, long-term tenants, and institutional-quality assets with less upside potential.
Cap rate ignores financing. Cash-on-cash return measures your actual return on invested equity after debt service. A 6% cap rate property financed at 75% LTV with a 6.5% mortgage might yield 8–12% cash-on-cash due to leverage amplification.
If market cap rates for similar properties are 7% and a seller prices at a 5.5% cap, the property may be overpriced. Conversely, buying at an above-market cap rate can indicate a value opportunity or hidden risk requiring due diligence.
Current market cap rate ranges across major CRE asset classes.
| Property Type | Cap Rate Range | Risk Profile | Typical Investors |
|---|---|---|---|
| Multifamily (Class A) | 4.5% – 5.5% | Low | Institutional, REIT, HNWI |
| Multifamily (Class B/C) | 5.5% – 7.5% | Low-Medium | Value-add investors |
| Industrial / Warehouse | 5.0% – 7.0% | Low-Medium | Institutional, logistics |
| Retail (NNN Lease) | 5.5% – 7.0% | Medium | Passive investors |
| Office (Suburban) | 6.5% – 8.5% | Medium-High | Value-add, regional investors |
| Medical Office | 5.5% – 7.0% | Low-Medium | Specialized CRE investors |
| Hotel / Hospitality | 7.0% – 10%+ | High | Experienced operators |
| Self-Storage | 5.5% – 8.0% | Medium | Operators, syndicators |
Common questions about cap rates and CRE investment analysis.
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