Real Estate & REITs
A property generates $5M of NOI and is worth $100M at a 5% cap rate. If cap rates expand 100 bps with NOI flat, what happens to value - and how much NOI growth would fully offset the move?
Model answer
At a 6% cap rate, value falls to $5M / 0.06 = $83.3 million - a decline of roughly 16.7% from a single 100 bps move. To hold value at $100 million at a 6% cap you would need NOI of 6% x $100M = $6…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from Real Estate & REITs
- What is net operating income (NOI), and what does it exclude?
- What is a cap rate, and how do you use it to value a property?
- Why does a LOWER cap rate mean a HIGHER property value?
- What drives cap rates up or down?
- How should you think about the spread between cap rates and interest rates?
- What is the difference between a going-in cap rate and an exit cap rate, and why do underwriters usually assume the exit cap is higher?
Try the real thing
1 / 3LBO & Paper LBO
What is a leveraged buyout?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.