Free CAP Rate Calculator for Commercial Real Estate Investors
Use our free CAP rate calculator to estimate the capitalization rate on any income-producing property in seconds.
Estimate Capitalization Rate on Income Properties
Enter the property price, gross rental income, vacancy rate, and annual operating expenses, and you'll instantly see the gross potential income, effective gross income, net operating income (NOI), and CAP rate — the key metrics every commercial real estate investor uses to size up a deal. Whether you're underwriting a small multifamily in Spokane, a mixed-use building in Coeur d'Alene, or a larger investment property across the Inland Northwest, Apex Property Management gives you a fast, reliable starting point — and a local team ready to help you go deeper.
Property & Income
Operating Expenses
Results
CAP Rate = Net Operating Income ÷ Property Price.
Estimates only — does not include debt service, taxes, depreciation, or capital expenditures.
How to Calculate CAP Rate
The capitalization rate — or CAP rate — is one of the most common metrics commercial real estate investors use to evaluate the return on an income-producing property. It expresses a property's annual net operating income as a percentage of its purchase price, giving you a quick, apples-to-apples way to compare investment opportunities.
The CAP rate formula is:
CAP Rate = Net Operating Income (NOI) ÷ Property Price × 100
Step 1: Calculate Gross Potential Income
Add up the property's total annual rental income at full occupancy, plus any utility reimbursements or other income (laundry, parking, storage, etc.).
Step 2: Subtract Vacancy Loss
Multiply the gross potential income by the expected vacancy rate, then subtract that figure to arrive at your effective gross income. For most Spokane and Kootenai County multifamily properties, a vacancy assumption of 5–8% is realistic.
Step 3: Subtract Operating Expenses
Operating expenses include property management fees, repairs and maintenance, property taxes, insurance, landscaping, utilities not reimbursed by tenants, and reserves. If you don't have a detailed expense breakdown yet, the industry standard is to estimate operating expenses at roughly 42% of effective gross income. The result is your net operating income (NOI).
Step 4: Divide NOI by Property Price
Take your NOI and divide it by the property's purchase price or current market value. Multiply by 100 to express the result as a percentage. That's your CAP rate.
What's a Good CAP Rate?
There's no single "good" CAP rate — it depends on the asset class, location, and risk profile. As a general rule:
- 4–6% is typical for stabilized properties in low-risk, high-demand market.
- 6–8% is common for well-located multifamily and small commercial properties in secondary markets like Spokane.
- 8%+ often signals higher risk, value-add opportunity, or a tertiary market.
A higher CAP rate isn't always better — it can reflect deferred maintenance, vacancy risk, or a less desirable location. A lower CAP rate often signals a more stable, lower-risk investment.
What CAP Rate Doesn't Tell You
CAP rate is a powerful screening tool, but it doesn't account for debt service, financing terms, tax treatment, depreciation, or capital expenditures. Before closing on any investment property, work with a qualified property manager and your CPA to build a complete pro forma.
Want a second set of eyes on your numbers?
Contact the Apex Property Management team for a free consultation — we manage properties across Spokane, Spokane Valley, Coeur d'Alene, and the greater Inland Northwest, and we'd be happy to help you underwrite your next deal.