Max Purchase Price (Target Cap Rate)
Max purchase = NOI / target cap rate. Reverse-engineer from desired return.
Result
Max purchase price
$134,550
NOI $10,764 / cap 8.0% = $134,550.
- Gross rent (annual)$18,000
- Vacancy %8.0%
- EGI (effective gross)$16,560
- Op expense %35%
- Op expenses$5,796
- NOI$10,764
- Target cap rate8%
- Max purchase$134,550
Step-by-step
- Gross = rent × 12 = $18,000.
- EGI = gross × (1 − vacancy) = $16,560.
- NOI = EGI − op expenses = $10,764.
- Max price = NOI / cap = $10,764 / 0.08 = $134,550.
How to use this calculator
- Enter monthly rent.
- Set vacancy % and op expense %.
- Choose target cap rate.
About this calculator
Cap rate = NOI / property value. Target a cap rate (your required return); back out max price you can pay. NOI = effective gross income − operating expenses. Op expenses typically 35-50% of EGI (taxes, insurance, maintenance, management, vacancy reserve, utilities if landlord-paid). Higher target cap = lower max price = stronger discipline. Investors typically target 6-10% cap rate; lower in hot markets, higher for tertiary markets.
Frequently asked
Class A urban: 4-6%. Suburban SFR: 6-8%. Tertiary markets: 8-12%. Higher cap = riskier neighborhood usually.
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