Unsure how to proceed? Follow the steps below.
Set the number of years between purchase and expected sale of the asset.
Make a forecast of the expected cash flows from operations for each year during the holding period.
Enter the expected sale proceeds after closing costs to be received in the final year of the holding period.
This is the required rate of return, or the return that could be generated by an alternative investment with the same amount of risk.
Cap rate is an abbreviation for capitalization rate and there are a few different ways to calculate it.
If everyone had access to perfect information, all parties would come up with the same value for a given piece of property.
Two approaches for determining total expected returns.
Learn three different ways to find cap rates from our informative video.
You'll usually make the most profit by selling to a traditional homebuyer. But this isn't always the case.
It's not always best to use NOI over cap rate to find a property value. Let us break it down for you.