CAP rate?

[Tara Piantanida-Kelly]

Hi All,

I understand that:

• CAP rate = NOI/purchase price
• Value = NOI/CAP rate

So, if I want to establish the VALUE of a property, how do I get the CAP rate?

I took the following notes in a commercial class I took: "You don’t know the cap rate. You get the cap rate for the area from the mortgage broker who specialize in the product you’re buying (multi-family). Ask them 'How should I underwrite this deal?' They’ll ask you questions, and then they’ll give you a number. They’ll say 'We can probably get you a loan at a 7 cap rate (or something like that).' If they are Fanny/Freddy approved, they can look at maps and give you the number."

But every time I put a call out to mortgage brokers to get a CAP rate (according to my notes), I'm told "you get the CAP rate by dividing the NOI by the purchase price". Yes, I'm aware of that calculation, but I'm trying to establish the VALUE... And around we go...

Any mortgage brokers want to chime in on this?

Thanks!

Cheers~

Tara Piantanida-Kelly

RogueSolutionsLLC.com