How do I calculate a cap rate?

Cap rate = net operating income (gross rent minus vacancy and operating expenses, before mortgage costs) divided by purchase price. It expresses a commercial property's unlevered annual yield.

How is a commercial property valued?

Primarily by the income approach: value = NOI divided by the market cap rate for that asset class and location. A lower cap rate means buyers accept a lower yield — and pay more per dollar of income.

What DSCR do commercial lenders require?

Debt service coverage ratio = NOI divided by annual mortgage payments. Many commercial lenders look for roughly 1.20–1.30 or higher, meaning income comfortably exceeds debt payments; below that, expect a smaller loan or more equity required.

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Free Commercial Tool

Cap Rate
Calculator

NOI, cap rate, DSCR and implied value — the four numbers every commercial deal in the GTA gets priced on.

Gross Annual Rental Income ($)

Vacancy & Credit Loss (%)

Annual Operating Expenses — taxes, insurance, utilities, maintenance, management ($)

Asking / Purchase Price ($)

Target Cap Rate for Valuation (%)

Down Payment (%) — for DSCR & cash-on-cash

Commercial Mortgage Rate (%)

Amortization (years)

Cap Rate at Asking Price

Net Operating Income

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Implied Value at Target Cap

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DSCR

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Cash-on-Cash Return

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Estimate only — not financial, lending, tax or investment advice. Figures use standard formulas and the assumptions you enter; your lender, accountant or lawyer will produce exact numbers for your situation. E. & O.E. NOI = effective gross income minus operating expenses (excluding mortgage). DSCR = NOI ÷ annual debt service; many commercial lenders look for roughly 1.20–1.30 or better. Cap rates vary by asset class, location and lease covenant — verify current market cap rates for your property type.

How commercial properties are actually priced

Commercial real estate is valued on income: value = net operating income ÷ cap rate. A property producing $80,000 of NOI is worth about $1.45M at a 5.5% cap and about $1.14M at a 7% cap — which is why knowing the right cap rate for your asset class and area matters more than any listing price. This tool works in both directions: it shows the cap rate implied by an asking price, and the value implied by your target cap rate.

It also checks what a lender will check first: the debt service coverage ratio. If DSCR comes in low, the loan gets smaller or the price has to come down. Selling a restaurant or food-service business? The restaurant value estimator handles that separately. For anything else commercial in Etobicoke or the GTA — retail, industrial, mixed-use, plazas — see how I work with commercial clients.

Want a real number, not just a formula?

Let’s run your
actual numbers.

Contact Jatin

Run this on a real listing?

Send me the address and I will pull the actual rents, taxes, condo fees and maintenance history, so the cap rate you are looking at is the real one rather than an estimate.

Call or text 833-330-1925 Send me the address

Jatin Dua, Broker of Record — RE/MAX Quantum Realty Inc., Brokerage. Not intended to solicit buyers or sellers currently under contract with another brokerage.

Cap RateCalculator

How commercial properties are actually priced

Let’s run youractual numbers.

Run this on a real listing?

Cap Rate
Calculator

Let’s run your
actual numbers.