A 6% cap on $1M NOI implies a ~$16.7M value. Cap rate is the language of commercial pricing. Lower cap = more expensive / lower yield / safer market.
Market & Valuation
Cap Rate (Capitalization Rate)
NOI ÷ Purchase Price — the unleveraged annual yield of a commercial property.
More in Market & Valuation
- NOI (Net Operating Income)— Gross income minus operating expenses — excludes debt service, capex, and income taxes.
- Operating Expenses (OpEx)— Recurring costs of running a property — taxes, insurance, management, maintenance, utiliti…
- CapEx (Capital Expenditures)— Large periodic replacements — roofs, HVAC, water heaters, appliances — budgeted separately…
- Vacancy Rate— The percentage of time a rental is expected to sit empty between tenants.
- Cash-on-Cash Return— Annual pre-tax cash flow divided by the total cash you invested to acquire the deal.
- Cash Flow— The money left after collecting rent and paying every expense including the mortgage.