This calculator does not predict an actual sale price of a property. If you are looking for an apartment building value calculator we recommend just dividing the Net Operating Income of your property by the expected Cap Rate. to determine fair market value for your property, a broker opinion of value (BOV) considers several other factors including your NOI, sales comps, condition, capital expenditures, purchase price etc.
Basic Apartment Building Value Calculation
NOI ÷ CapRate
Example: $50,000 (NOI) ÷ 7% Cap Rate = $714,285 Approximate Value
Key Considerations and Terms
This value-added calculator helps investors quickly see the value they add to their properties by increasing their total rental income and based upon changes to the rents, number of units and expected cap rate. This is not an apartment building value calculator as much as it is a way to visualize the impact of capital expenditures.
Capital Expenditures
In many cases, capital expenditure or “cap-ex” is required if you want to raise rents. Spending your money in the right areas will maximize your ROI. For starters, paint, floor coverings and countertops go a long way to making a unit feel modern, clean and updated. Although these expenses do produce a good return on your investment, it is always essential to make sure the property is structurally sound first. Mold and radon remediation cost money, but you should never overlook these issues to save money. To get an accurate estimate of added value subtract your cap-ex from the total value.
Net Operating Income
Net Operating Income or NOI is calculated by subtracting all of your fixed and variable expenses from the income generated by your rental property. Your income sources include rents but also any money that comes in from a laundry facility or other amenities your property offers. Changes to the income or expense side can influence your NOI. Raising rents will typically have a positive affect on your NOI unless it causes a sudden increase in vacancies. For more information check out this article on Investopedia.com
Capitalization Rate
Real estate investors often use the capitalization rate, or ‘cap rate,’ as a key financial metric. It is a percentage that expresses the relationship between a property’s net operating income (NOI) and its current market value or acquisition cost. Our calculator assumes you bought and plan to sell at the same cap rate and doesn’t take cap-ex into account.
