A property has an NOI of $250,000 and is selling for $6,500,000. Therefore, the property is selling at a 6.5% cap rate.
Property Value = NOI/CAP Rate. By applying simple algebra then.
CAP Rate = NOI/Purchase Price. In this example, NOI = $250,000 and Purchase Price = $6,500,000. Therefore the CAP Rate would be 3.85% ($250,000/$6,500,000).
Property Value = NOI/CAP Rate. By applying simple algebra then.
CAP Rate = NOI/Purchase Price. In this example, NOI = $250,000 and Purchase Price = $6,500,000. Therefore the CAP Rate would be 3.85% ($250,000/$6,500,000).