How to Calculate the Value of Income Property
The value of an income property is primarily based on the net operating income, or NOI, that it produces. How you decide to finance the property is not relevant. The capitalization, or cap, rate is the NOI divided by the property's value. Consequently, the NOI divided by the cap rate is the property's value.
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Instructions
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Add your rental, reimbursement and other income. The sum is your gross revenue.
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Subtract all of your operating expenses from your gross revenue. This is the net operating income -- the NOI.
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Divide your NOI by the given cap rate or by the cap rate for the building class of your type of building in your building's area. The result is the (actual or estimated) property value.
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References
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