…100% means the property is worth less than the outstanding loan amount. A loan to value less than 100% means the property is worth more than the outstanding loan amount….

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…and the expected market value of our project once stabilized is $1,200,000. In this case the going-out cap rate would be 100,000/1,200,000, or 8.33%. It is also common to see…

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The Debt Service Coverage Ratio, often abbreviated as “DSCR”, is an important concept in real estate finance and commercial lending. It’s critical when underwriting commercial real estate and business loans…

…inflated due to low market cap rates, low-interest rates, or high amortization periods. The debt yield is also used as a common metric to compare risk relative to other loans….

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…Rate with Sales Comps Since a property’s value is often what we don’t know, it is common to simply divide our known net operating income by a market-based cap rate….

…for 1,000,000 and had a stabilized NOI of 100,000, then the cap rate would be 100,000/1,000,000, or 10%. The cap rate formula can also be re-arranged to solve for value:…

…rate from the comparable property as follows: 0.415 / 5.00 = 8.3% If this procedure was completed for all comparable properties, then an overall capitalization rate could be estimated by…