How do you determine the cap rate of a property if the purchase price is unknown?
One approach is to look at cap rates from sales of comparable properties. But what if comparable sale data is unavailable? Or what if you think there is a real estate bubble, and it’s making you reluctant to rely on cap rates from recent sales?
In these instances, you can use historical risk premiums to determine what the cap rate should be using the formula shown below.
This infographic illustrates how to determine a cap rate when the purchase price is unknown. For more information on the subject, visit our cap rate formula page, which includes videos and a more detailed discussion.
Trying to determine the cap rate for a specific property? Use our free tool to find the cap rate and value for any apartment rental property in the United States.