That's Cap

In this exercise, you will use the Net Operating Income to find the estimated property value of West Ridge North.

Real estate investors rely on the capitalization rate, or cap rate for short, to calculate their yield on the investment. The cap rate is found by using this formula: [Cap Rate] = [Net Operating Income]/[Property Value]

Investors generally have a target cap rate in mind already, so using some simple algebra, we can rearrange this formula to find a property value: [Property Value] = [Net Operating Income]/[Cap Rate]

If you have lost progress, close any open workbooks and load 1_1_financial_subtotals.xslx from the Exercises folder.