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WE PROVIDE THE PERFORMANCE BENCHMARKS YOU NEED FOR INVESTMENT ANALYSIS

  • Gross Income: A popular benchmark multiplied by a factor, usually between 3.5 to 5.0.
  • Capitalization Rate: A popular indication of past performance and likely future returns.
  • RevPar: (Revenue per available room) Takes into account down rooms due to renovation, etc.
  • Replacement cost: The structure, location, and land value is considered in any appraisal.
  • 5-Year Hold Analysis: A 5-year projection, using conservative assumptions, estimating before tax & after tax IRR returns of a given property.

    Plus a myriad of other considerations; franchise affiliations, external & internal trends, the property’s own operational dynamics, etc. 



WHAT IS "CAP RATE” & HOW IMPORTANT IS IT?

Capitalization rate is a snapshot of a property’s performance at a specific date and time, usually taken at the previous year end. Capitalizations may, or may not, reflect present value but are popular benchmarks for many buyers.


Determining Income Capitalization Rate in 2-Easy Steps

 

STEP 1.  Determine NOI.

Total Revenues minus Stabilized Operating Expenses = Net Operating Income (NOI)

STEP 2. Derive Cap rate.

NOI divided by the Asking Price = Capitalization rate (Cap rate) expressed by a fraction of the sale price.


Using Cap Rate to Determine Your Offer

Divide NOI by your desired capitalization yield to obtain an indication of value to you.

This rate is directly influenced by the riskiness of the investment, the quantity, quality and durability of the expected income stream, the length of time the investor must wait for Return on Investment, (ROI), and the returns available on competing investments (lost opportunity costs).