Cap Rate Calculator

The cap rate is a widely used ratio in commercial real estate analysis. To help you quickly calculate the cap rate using various cap rate calculation methods, we’ve also created a handy cap rate calculator in Excel.

How to Use The Excel Cap Rate Calculator

Here is how you can use this cap rate calculator, step by step.

1. Download the cap rate calculator using the form above.
2. Choose the cap rate calculation method you prefer by selecting a spreadsheet tab. Methods of cap rate calculations include the cap rate ratio, band of investment, or the gordon model.
3. Enter the assumptions on the selected tab/method.
4. View the calculated cap rate.

As you can see, we’ve made it simple to use our cap rate calculator.

Cap Rate Calculator in Excel Example #1

Let’s walk through a simple ratio example using this cap rate calculator. Suppose we have an NOI of $750,000 and a property value of $10,000,000. Here’s how we can calculate the simple cap rate ratio:

As shown above, we can enter in a few basic assumptions about the property to build a year 1 proforma. Then we’ll have our net operating income automatically calculated, along with the cap rate, which in this case is 7.5%.

Cap Rate Calculator in Excel Example #2

Now suppose we want to find the property value but we don’t know what the appropriate cap rate should be. In this case we can use the band of investment method to calculate a market based cap rate.

The band of investment cap rate calculation method takes market based commercial loan assumptions as well as investor rate of return requirements. Using this data we can calculate a cap rate by taking a weighted average of the mortgage constant and the investor’s required rate of return for a project similar to the one we are evaluating. This cap rate calculator produces a cap rate that comes from the weighted average.

Cap Rate Calculator in Excel Example #3

We can also calculate the cap rate using the gordon growth model popular with valuing stocks. Since the cap rate is simply the discount rate minus the growth rate, if we know 2 out of three variables then we can easily solve for the remaining unknown. For example, suppose we know that the discount rate (required return) is 10% and our NOI is expected to grow at a constant rate of 1%. That means our cap rate is simply 10%-1%, or 9%. If our NOI is $100,000 then that means our property value is $1,111,111.