Home · Resource Center · Income value
You value a rental from its income by dividing net operating income by a cap rate. A band of cap rates produces a band of values, and the offer is the price that still hits the cap rate you require. The gross rent multiplier is the quick check that the price is a sensible multiple of rent before expenses.
By RentalAnalytics Editorial Team · Published October 19, 2026
Use net operating income, not the rent check. NOI is property revenue after vacancy and operating expenses, and before loan payments. NOI explained for rentals walks through that order. The mortgage, depreciation, and income tax stay out.
Build the line in the cash flow analyzer before you divide anything. You enter purchase price, financing, monthly rent, vacancy, taxes, insurance, maintenance, and a management fee. It itemizes the yearly P&L, then cash flow after the loan. The cap rate step uses the NOI, not the cash flow after debt.
The dollars in this example are round assumptions so the division is easy to check. They are not a rent survey.
J.P. Morgan's cap rate note calculates the rate by dividing NOI by asset value, and it treats the result as the property's yield over one year. Flip the division when you are solving for price. Value equals NOI divided by the cap rate you are willing to pay.
The Cap Rate Calculator compares your result with a metro-tier band. The benchmark file it loads is dated to the fourth quarter of 2024. The file's own note describes the bands as estimates drawn from CBRE U.S. Cap Rate Survey ranges, NCREIF metro tiers, and brokerage market reports. This article uses the file's numbers as the calculator shows them. It does not re-survey those firms.
For a single-family rental the file lists these bands:
An unrecognized ZIP is treated as Tier 2 in the calculator's script. Small multifamily, larger multifamily, and condos have their own rows in the same file. Type the ZIP and the property type so the band matches the deal in front of you.
Using the Tier 2 single-family band and the example NOI of $24,000:
The range is $300,000 to $400,000. The offer at the midpoint of this band is $342,857. A buyer who will not accept a cap rate below 8 percent stops at $300,000. Same NOI, different required yield. If the comps support another band, divide $24,000 by those rates instead.
Cap rate ignores the loan. Cap rate vs cash-on-cash is the page that separates the unlevered yield from the cash you actually put in. A price that works at a 7 percent cap rate can still fail once the payment is subtracted. Run that second test in the cash flow analyzer after the offer price is set.
The gross rent multiplier is price divided by annual gross rent, before vacancy and before expenses. J.P. Morgan states it that way, and also the reverse: if you already know a multiplier, estimated value is the multiplier times annual gross rent. The same note says there is no single standard for a good multiplier, because it varies by market, property type, and risk. Gross rent multiplier explained is the longer walkthrough on this site.
On the example's $36,000 of gross rent:
Those multipliers describe one building at three prices. A building with the same rent and higher expenses can share a multiplier and show a weaker cap rate. J.P. Morgan's formula example is a $1 million property with $200,000 of gross rent, a multiplier of 5. That is their arithmetic illustration, not a target here.
Enter price, annual gross rent, vacancy, and operating expenses in the calculator. It returns NOI and the cap rate, then sets that rate against the tier band. Add financing if you also want cash-on-cash. The loan stays out of the cap rate.
Divide NOI by a cap rate the comps support. A band of rates gives a high price and a low price. The offer is the price that still meets the cap rate you require.
The calculator's file, dated to the fourth quarter of 2024, uses a different band for each tier and property type. Tier 2 single-family in that file is 6.0 percent to 8.0 percent. The file calls the figures estimates. Enter the ZIP and the property type.
Price divided by $36,000 of annual gross rent. The $300,000 price is 8.33. The $400,000 price is 11.11. The multiplier ignores the $10,200 of expenses and the vacancy.
No. Cap rate uses NOI and price. The down payment changes cash-on-cash return and the loan size. It does not change NOI divided by the cap rate.
Use gross rent for the multiplier screen. The offer from income is NOI divided by the cap rate. Gross rent still includes vacancy, taxes, insurance, and repairs.
Put the rent, vacancy, and operating costs into the Cap Rate Calculator and read the cap rate against the tier band. Divide your NOI by the cap rate you are willing to pay, and that is the offer. Then run the same rent and expenses through the cash flow analyzer with the loan you would actually use.
More on RentalAnalytics → all articles · all tools · city reports