How is the Gross Sale Price calculated when using CAP NOI (12 Months After Sale)?

The Gross Sale Price is calculated by taking the Net Operating Income (NOI) that is to be capitalized and dividing it by the Capitalization Rate (Cap Rate). This method reflects the principle that the value of a property is derived from the income it generates. The Cap Rate represents the expected rate of return on an investment and, by dividing the NOI by this rate, you effectively convert the income stream into an estimated market value.

In this context, using the NOI to determine the Gross Sale Price provides a straightforward way to assess what a property is worth based on its income-generating potential. This is particularly useful in investment real estate, where potential buyers are typically interested in the return on their investment.

Calculating the Gross Sale Price using this formula allows investors to make informed decisions based on how much they can expect to earn relative to their investment based on current market conditions reflected in the Cap Rate.