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Property Value from NOI illustration

Real Estate · Valuation

Property Value from NOI

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Use this valuation shortcut to convert stabilized NOI into an estimated market value at a chosen cap rate.

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Interactive workbench

Income approach value

Net Operating IncomeCap Rate

$120,000 NOI divided by a 6% cap rate implies a $2,000,000 value.

Step 1 of 3

Variables and units

  • Net Operating Income

    Income after operating expenses.

    currency

  • Cap Rate

    Enter 6 for 6%.

    percent

Common mistakes

  • Entering cap rate as 0.06 instead of 6.
  • Using unstable NOI without normalizing major one-time items.

Step-by-step example

Income approach value

  1. 1. Start with the example inputs

    • Net Operating Income$120,000
    • Cap Rate6%

  2. 2. Apply the formula

    Net Operating IncomeCap Rate

  3. 3. Run the numbers

    $2,000,000.00

    $120,000 NOI divided by a 6% cap rate implies a $2,000,000 value.

What this result means

$2,000,000.00 is what the income stream is worth when capitalized at your chosen cap rate — the same math appraisers use for income property. The estimate is only as good as the cap rate: small changes move the value a lot, so test a range drawn from comparable recent sales.