KNOW WHAT HAS TO GO RIGHT
Put the deal
under pressure.
Watch what happens when expenses outrun revenue—and when buyers demand a higher cap rate.
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PROJECTED YEAR
Where the rent goes
NOI over the holding period
Year-by-year projections
| Year | Revenue | Expenses | NOI | Cash flow¹ |
|---|
Understand the assumptions
Revenue means effective gross income: rent and other recurring income after vacancy, concessions and credit losses. Revenue growth holds occupancy and collections constant; reflect changes in those conditions in your revenue assumptions. Operating expenses exclude debt service, depreciation and capital expenditures.
Exit value uses the following year’s projected NOI divided by your exit cap rate. Cap rates do not determine the loan rate. Annual cash flow¹ is NOI less scheduled debt service and the annual capital reserve. Sale proceeds subtract selling costs and the remaining loan balance. Initial cash includes the down payment, acquisition costs and upfront improvements. Returns are before taxes and exclude sponsor fees, waterfalls and refinancing.
These are hypothetical projections, not an appraisal or a forecast. No CPI or live market data is used. If forward NOI is zero or negative, the cap-rate valuation is not meaningful. Actual expenses, financing terms and sale values can differ.