Calculate the cap rate of any property in seconds. Solve for cap rate, or solve for value at a target cap rate. Built for small multifamily operators.
NOI = gross rent + other income − operating expenses. Excludes mortgage.
What you'd pay all-cash for the property today.
Cap rate (capitalization rate) is the ratio of a property's net operating income to its value. It tells you the unlevered yield — what you'd earn annually if you paid all cash and had no mortgage.
It's the most common metric for comparing properties because it strips out the noise of how different buyers might finance the same deal. Two investors looking at the same building see the same cap rate, even if one is paying cash and the other is putting 25% down.
What goes into NOI: Gross rent + ancillary income (laundry, parking, late fees) − operating expenses. Opex includes property tax, insurance, property management, repairs, maintenance, utilities you pay, and a vacancy allowance (typically 5–8%).
What does NOT go into NOI: Mortgage payments, capital improvements, or depreciation. Those affect your levered returns and tax picture, but not the property's underlying yield.
Depends entirely on market, asset class, and your strategy. Here's how to read different cap rate ranges for small multifamily in the current rate environment.
Typical for stabilized Class A in tier-1 coastal markets (SF, NYC, Boston, LA). Operators are paying for safety + appreciation, not yield. At this level you're usually losing cash flow to long-term wealth play.
Stabilized Class A/B in strong secondary markets (Austin, Denver, Raleigh, Nashville). Reasonable for institutional product. Tight cash flow margins; debt service coverage is the watchout.
The sweet spot for most small multifamily operators today. Cash flow positive after debt service, room for value-add upside. Most 30-100 door operators target this band.
Either tertiary market product or properties with operational/physical upside. Strong day-1 cash flow but inspect for deferred maintenance, tenant quality, market trajectory. Common in Midwest secondary.
Usually distress, declining markets, or aggressive seller pro-forma vs actuals. Diligence with extreme care. Real returns are often 200-400 bps lower than headline once you account for real expenses, vacancy, and capex.
They're different lenses on the same deal. Cap rate is property-level yield (unlevered). Cash-on-cash is your personal cash yield after debt service (levered).
Independent of financing. Used to compare properties. Same answer whether you pay cash or finance.
After debt service. Used to evaluate your personal return. Can be 2-3x the cap rate when financed aggressively.
On a property with a 6.5% cap rate, financing 75% LTV at 7% debt cost might produce a cash-on-cash return of 5-9% depending on terms. Both numbers matter. Cap rate sets the ceiling on what financing can do.
The single most common cap rate mistake. Gross rent isn't NOI — you have to subtract operating expenses first. A property at $120k gross income with $48k opex has $72k NOI, not $120k. Using gross numbers inflates cap rate by 40-60%.
Even a fully-occupied property should be underwritten with 5-8% vacancy allowance. The day one tenant leaves and the unit sits empty for 30 days during turnover, your cap rate drops. If you skip this, you're using best-case numbers.
Brokers and sellers will show you a pro forma where rents are pushed to market and expenses are aspirationally lean. Always run cap rate on T-12 actuals first. Use pro forma to evaluate upside, not price.
If you're not paying yourself for PM time, your NOI is inflated by 6-10%. Underwrite a market-rate PM line (8-10% of gross for small multifamily) even if you self-manage. Otherwise you can't compare your deal to a deal you'd hire PM for.
A 7% cap rate in Phoenix Class A means something completely different than 7% in rural Ohio Class C. Compare cap rates within the same market and asset class, not across them.