CAP Rate Calculation

[Ryan Pearlman]

Hi Guys! Evaluating a deal at the moment and I am curious how you would calculate your CAP rate. Once our building is stabilized we are anticipating a CAP rate as follows (backed by market data):

1. CAP of 9.57% if we take into account the TOTAL deal cost (purchase price, closing costs, renovations, fees, reserves, etc.) So calculation is our NOI of $158k / total deal cost of 1.65MM

2. CAP of 12.14% if we take into account just the purchase price. So calculation is our NOI of $158k / purchase price of 1.3MM.

Thank you in advance!

Ryan