Cap rate (capitalization rate) is the single most important metric for valuing income-producing commercial real estate. Whether you’re buying, selling, or refinancing, knowing your cap rate tells you what your property is worth, what lenders will lend against it, and how your deal compares to the market. Use the free calculator below to find your cap rate in seconds.
Cap Rate Calculator for Commercial Real Estate
What Is Cap Rate and Why Does It Matter?
Cap rate (capitalization rate) measures the rate of return on a commercial real estate investment based on the income the property generates. The formula is:
Cap Rate = Net Operating Income (NOI) / Property Value
For example, if a property generates $145,000 in NOI and is worth $1,850,000, the cap rate is 7.8%.
How Lenders Use Cap Rate in Refinancing
When you apply for a commercial mortgage refinance, the lender’s appraiser estimates a cap rate for your property. That cap rate, applied to your NOI, determines the appraised value, which sets your maximum loan amount through the loan-to-value (LTV) ratio.
- Lower cap rate = higher value = more borrowing capacity
- Higher cap rate = lower value = less borrowing capacity
Typical Cap Rates by Property Type (2026)
- Multifamily: 4.5%-6.5%
- Industrial: 5.0%-7.0%
- Retail (anchored): 5.5%-7.5%
- Office: 6.5%-9.5%
- Self-storage: 6.0%-8.0%
- Hospitality: 7.5%-10.0%
- Medical office: 5.5%-7.5%
- Mixed-use: 5.5%-7.5%
NOI vs. Cap Rate: Two Sides of the Same Coin
If you know your NOI and the market cap rate for your property type, you can estimate your property’s value:
Estimated Value = NOI / Market Cap Rate
A property with $200,000 NOI at a 6.5% cap rate would be valued at approximately $3,077,000. At 75% LTV, that supports a loan of about $2,308,000.
What to Do If Your Cap Rate Does Not Support Your Refinance Goals
Increase NOI before refinancing. Raise rents to market, reduce operating expenses, or fill vacancies.
Wait for market conditions to shift. Cap rates compress when investor demand rises.
Use a bridge loan. Short-term capital while you stabilize the property for a permanent refinance at a better cap rate.
Work with a broker who knows which lenders are flexible. Some lenders use different cap rate assumptions or underwrite NOI differently. RefiLoop can identify those lenders.
How RefiLoop Helps
If you’re planning to refinance and want to understand how lenders will value your property, RefiLoop can help. We review your financials, benchmark your cap rate against current market data, and match you with lenders whose underwriting approach is most favorable to your property profile. We work on commercial loans from $200,000 to $15 million across all major US markets.
Schedule a free 15-minute review and we’ll tell you what your property is likely to appraise for.
Frequently Asked Questions
What is a good cap rate for commercial real estate?
There’s no single “good” cap rate. A 5.5% cap rate on Class A multifamily in a primary market is strong. The key question is whether the cap rate justifies the risk and supports your refinancing goals.
How is cap rate different from cash-on-cash return?
Cap rate measures unlevered return (no mortgage). Cash-on-cash return measures levered return (after debt service).
Do lenders use cap rate or DSCR to determine my loan amount?
Both. The appraiser uses cap rate to determine value, which sets the LTV ceiling. The lender separately calculates DSCR. Your loan amount is the lower of LTV-based max or DSCR-based max.
Can I use projected future NOI for cap rate?
For valuation, cap rate uses current in-place NOI. Bridge lenders and debt funds may underwrite to stabilized NOI, which can support a higher valuation.
About David Greenbaum
David Greenbaum is a commercial mortgage broker and co-founder of RefiLoop. He specializes in helping commercial property owners refinance maturing loans between $200K and $15M across Texas, Florida, Georgia, North Carolina, Ohio, and other priority markets. With hands-on experience in commercial bridge loans, debt fund financing, and conventional CRE refinancing, David helps borrowers find the right capital source for their situation — not just the easiest one.