Two of the most common metrics used to measure the profitability of a multifamily real estate investment are net operating income (NOI) and capitalization rate (cap rate). These metrics can also be used to provide a quick comparison between different properties in order to help investors make informed decisions about which investment might be the best deal.
What some beginner investors don’t realize is that NOI and cap rate calculations are not always the most accurate tools for predicting a property’s profitability. The KataLYST Team has spent countless hours exploring commercial real estate trends and common practices, including deep dives into calculations such as NOI and cap rate. Read on to find out more about how to calculate cap rate from NOI accurately and which metrics might be more accurate for determining profitability in multifamily markets.