Band of Investment
Mortgage Loan Constant
Loan to Value Ratio
Equity Dividend Rate
Mortgage Loan Constant
Indicated Capitalization Rate
Final Rounded Cap Rate
About Our Band of Investment Calculator
Our band of investment calculator is a powerful tool that is designed to help appraisers and other commercial real estate professionals determine the market capitalization rate, even with limited information. Appraisers frequently use the band of investment calculation, which is an application of the weighted average cost of capital.
With the band of investment calculator, an appraiser can extract the overall capitalization rate for a market by surveying local lenders and investors. The lender survey provides the appraiser with information about the typical loan terms for the subject property, while the investor survey indicates the typical required cash on cash return. With this data, the appraiser can calculate the overall capitalization rate.
For example, let’s suppose that lenders are willing to underwrite a loan for the subject property at a 75% loan to value ratio, amortized over 25 years, at an interest rate of 5%. This results in a mortgage constant of 0.07015. If the cash on cash return required by investors is 11%, we have enough information to estimate the overall capitalization rate.
The band of investment calculator performs this type of analysis, which is commonly used by appraisers when market data is difficult to find. This can occur during slow periods in the market cycle or in tertiary markets that do not have a lot of transaction volume. By using our calculator, appraisers, and other CRE professionals can easily determine the overall capitalization rate, allowing them to make informed decisions about real estate investments.
The band of investment calculator is designed to be simple and easy to use. It requires only a few inputs, including the loan to value ratio, mortgage constant, and cash on cash return. The calculator then generates an estimate of the overall capitalization rate, which can be used to determine the market value of the subject property.
One of the significant advantages of our band of investment calculator is it’s sharable. It can be used to calculate the cap rate and then shared with your team. This makes it an ideal tool for appraisers for quick back of the envelope calculations that you want to collaborate with others on.
In conclusion, our band of investment calculator is a valuable tool for appraisers and other commercial real estate professionals who need to determine the market capitalization rate. With its simple inputs and complex calculations, it is easy to use and can provide accurate results for a wide range of real estate properties. Whether you are a seasoned professional or a beginner, our calculator can help you make informed decisions about real estate investments. Try it out now and experience the benefits of this simple tool.