If, for example, the cap rate is 10%, then in our hypothetical, the value of the building will be 640,000 dollars. Simply enter your noi and purchase price or market value. Once you know the net operating income and the cap rate, you can figure out the value.
This Result Is The Value Of Your Property.
Capitalization rate formula (net operating income / current market value) x 100 = capitalization rate. The term market capitalization means the total value of a particular company if it sells all its shares in the stock market at the current market price. The capitalization rate for property b is calculated using the below formula.
Capitalization Rate = Net Operating Income / Current Market Value (Purchase Price)
The cap rate is calculated as 12% minus 3%, or 9%. First, we talked about how to calculate the simple capitalization rate ratio when you know both the noi as well as the value of a property. Gross income is the monthly rent x 12 to capture the annual income received.
So, If For Example, The Analyst Determines That The Appropriate Market Cap Rate Is 0.08 Then The Value Of The Apartment Building In Our Example That Produces An Noi Of $21,000 Will Be:
Annual income annual income is the total value of income earned during a fiscal year. Therefore we can calculate outstanding shares as. How do you calculate a cap rate?
The Formula For Cap Rate Is Equal To Net Operating Income (Noi) Divided By The Current Market Value Of The Asset.
From example 2, the noi was $180,000 and the capitalization rate was 9.00%. Divide that by the $250,000 sales price. To calculate the market value of your property, you simply have to divide the net income by the cap rate: