regarding cap rates, how to calculate any return on investmt in an old buidling that is going to be rehabbed?

In General Area - Asked by Linda D. - Feb 3, 2011
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Bruce K.
Corporate Investor
Riverside, CA

Just add your rehab costs together with the acquisition costs and divide the NOI by that.
Example: bldg has $80,000 NOI and purchase price is $1M, equals a cap rate of 8%. Same bldg, but you are going to do $1M of rehab to it after the purchase. So, now your "cost basis" is $2M. So, $80,000 NOI divided by $2M equals a 4% cap rate.

Feb 3, 2011
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