Value Based on Cap Rate

Property value estimated by dividing NOI by the cap rate.

Example Result

Sample Data

$385,000

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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Value Based on Cap Rate Formula

NOI / Cap Rate

$20,344 / 5.28%

$385,000

What This Means

A sample property priced at $385,000 with $2,850/month rent has a value based on cap rate of $385,000. This tells you what the property is worth based purely on income. If the asking price is much higher than this value, the seller is pricing in future upside. If lower, the property may be undervalued relative to its income.

Where This Value Comes From

Value Based on Cap Rate is not entered directly — it is calculated from Net Operating Income and Cap Rate. See the formula breakdown above and the detailed inputs below.

Calculated From

Value Based on Cap Rate is calculated using these inputs:

Net Operating Income

Income remaining after all operating expenses but before debt service.

$20,344

Cap Rate

Net operating income as a percentage of property value.

5.28%

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Why It Matters

This tells you what the property is worth based purely on income. If the asking price is much higher than this value, the seller is pricing in future upside. If lower, the property may be undervalued relative to its income.

Detailed Explanation

This income-approach valuation divides the NOI by the property's cap rate to estimate market value. This method is widely used in commercial real estate and shows what the property "should" be worth based on its income.