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Property value calculator
The income approach: a rental is worth what its net operating income is worth at the market cap rate. Enter NOI and the local cap rate to estimate value, and see how sensitive that value is to the rate.
Each half-point move in the cap rate changes this value by roughly $45,455. That's why the market's cap rate matters as much as the income itself.
Don't know your NOI yet? Build it up with the cap rate calculator.
How the income approach works
e.g. $30,000 ÷ 6% = $500,000
For income-producing property, value is derived from what it earns, not from what a comparable home sold for. Net operating income is the income after operating expenses but before financing, and the cap rate is the yield the market currently demands for that kind of income in that location. Divide one by the other and you have the price at which a buyer earns exactly the market rate.
Why the cap rate is the whole game
Because it's the denominator, small changes in the cap rate swing value dramatically. When rates fall and cap rates compress, values rise even with flat rents, and the reverse is brutal on the way up. This is the single biggest lever in commercial and multifamily valuation, and the sensitivity table above makes it concrete.
Getting NOI and the cap rate right
Use a fully-loaded NOI, real vacancy, management, and capital reserves included, or you'll overvalue the property. Pull the cap rate from genuinely comparable recent sales, not a national average, since a good cap rate in Cleveland is a very different number than one in San Jose.
Valuation questions
How do you value a rental from NOI?
Divide net operating income by the market capitalization rate. This is the income approach: value equals NOI divided by cap rate. A property earning $30,000 of NOI in a 6 percent cap market is worth about $500,000. It values the income stream directly rather than comparing to nearby home sales.
Where do I get the market cap rate?
From recent sales of comparable properties, using their actual NOI and sale price: cap rate equals their NOI divided by their sale price. Brokers and appraisers track these figures, and they vary by market, property class, and condition. Faro derives market value from comps automatically for every report.
Why does a small cap-rate change move value so much?
Because value is NOI divided by cap rate, and the cap rate sits in the denominator. Moving from a 6 to a 5.5 percent cap raises value by about 9 percent on the same income. That leverage is why interest-rate-driven cap-rate compression can drive valuations more than rent growth does.
Every calculator
A value backed by real comps.
Faro estimates market value from actual comparable sales and rents, not a single assumed cap rate: paste a listing to see it.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.