Hello, this is Shuo.
So we learned about CAP Rate, we learned about net operating income (NOI), so now we can do the calculation. So a multifamily property’s value equals NOI divided by CAP Rate.
So for example, if a property’s NOI is $600,000 trading at 6% cap, the property’s value will be 600,000 divided by 0.06 and that’s $10 million.
So you are sellers listing it at 15 million and then you know, using the same equation you will know that the seller is trying to sell it at 4% cap.
Receive daily 1-minute videos to help you learn to be a better investor?
Patrick Grimes is a design engineer and CEO and Founder of Invest on Main Street, LLC. His real estate holdings include general partner ownership of a multifamily and single-family real estate portfolio valued over $146M, including 1,950+ units across the southeastern United States and Texas.
He has been active in real estate investment since 2007, including purchasing land and distressed assets, renovating them, and stabilizing them for long-term cash flow. To scale his real estate portfolio, Patrick moved from single-family to multifamily investing and founded Invest on Main Street, a private equity firm specializing in multifamily value-add projects in emerging markets.