Pro forma cap rate calculation

[Daan Van Straeten]

Hello,

When i was watching the analysis video on the BP Youtube channel i was wondering how they did calculate the Pro Forma Cap Rate.

As far i know it is calculate like this:
Pro Forma Capa Rate = ((Monthly Income - Total Operating Expenses)*12)/After Repair Value
Purchase Cap Rate = ((Monthly Income - Total Operating Expenses)*12)/Purchase Price

In the BiggerPockets video (https://www.youtube.com/watch?v=hrOR9mYk0Vs&t=731s) they use the same after repair value as the purchase price. So the Pro forma en Purchase cap rate should be the same, but that isnt the case.

Can someone help me? Thanks alot in advance!

Daan.

[Immanuel Sibero]

Originally posted by @Daan Van Straeten:

Hello,

When i was watching the analysis video on the BP Youtube channel i was wondering how they did calculate the Pro Forma Cap Rate.

As far i know it is calculate like this:
Pro Forma Capa Rate = ((Monthly Income - Total Operating Expenses)*12)/After Repair Value
Purchase Cap Rate = ((Monthly Income - Total Operating Expenses)*12)/Purchase Price

In the BiggerPockets video (https://www.youtube.com/watch?v=hrOR9mYk0Vs&t=731s) they use the same after repair value as the purchase price. So the Pro forma en Purchase cap rate should be the same, but that isnt the case.

Can someone help me? Thanks alot in advance!

Daan.

Daan,

I didn't look at the video but from the partial summary you posted here is what I was able to calculate (i.e. reverse engineer the numbers):

Description	Monthly	Annually
Revenue	1,595.00	19,140.00
Expenses	1,002.42	12,029.00
NOI	592.58	7,111.00
Loan Payment	486.87	5,842.44
Cashflow	105.71	1,268.56
Proforma Cap Rate	NOI / Total Cost	5.805%
Purchase Cap Rate	NOI / ARV	6.183%

So it looks like the cap rate formulas are backwards from what you think. To me these cap rate calculations are just useless, they don't tell me much. This is not what "capitalization rate" is all about so I didn't bother watching the video.

Cheers... Immanuel