Once NOI has been calculated, cap rate is an easy number to reach. NOI = Effective Gross Income - Property Operating Expenses To calculate it, we do not consider expenses related to mortgage interest or principal payments: NOI is strictly annual operating income less property level expenses. Net Operating Income (NOI) / Purchase Price Comparable properties are typically those that are geographically similar, of the same property type, and have a similar business strategy, whether that be a stabilized or a value-add play.Ĭap rate or capitalization rate is another performance metric that measures an investment property’s unlevered rate of return. Is this a good return? To figure that out, you’ll need some benchmark (i.e., comparable properties) to compare against. The property price for this example was $12,000,000 and the initial cash outlay was $2,400,000. Here’s an example calculation of a cash-on-cash return:
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |