Property Value for Cap Rate

[Frank Fiore Jr]

Cap Rate is basically determining your return if you paid all cash for the property. Correct?

My question is how do you determine Property Price, is this the final "sale price" or do you include repairs, closing cost etc... ? I thought this was independent of financing of the deal? So why closing cost?

In J Scotts blog he includes closing cost and repair cost when determining Cap Rate, this is confusing me a bit.

Cap Rate = NOI / Property Price

J Scotts Blog Introduction to Real Estate Investment Analysis

His example under Cap Rate looks like this:

Here is the cap rate for our example property:

Cap Rate = NOI / Property Price

= $37,169 / $418,000

= 8.89%

If you look at the blog he breaks down the 418k at the top in the Cost Assumption table:

I am trying hard to learn and remember these financial terms but depending on where I read I find discrepancies and it makes me crazy.

As we all know the inclusion or exclusion of different factors can change the numbers and make a good deal look bad or bad deal look good.

I'm just trying to get this stuff straight so I can create my spreadsheet and know its providing accurate data. Any and all feedback appreciated....