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Cap Rate Bridge Calculator
A value-add's headline going-in yield hides the work needed to reach stabilized. This calculator bridges the two cap rates with NOI lift and price change.
Value created
$2,769,231
In-place cap rate
5.63%
Stabilized cap on buy
8.75%
How the math works
Value created = (stabilized NOI ÷ exit cap) − purchase price. Bridge = stabilized cap − in-place cap.
Aim for 200bps+ stabilized yield spread over exit cap. That spread buys the reversion gain. Thinner spreads leave the deal dependent on cap compression — a bet on the market, not your operations.
How to Use
- Enter in-place NOI and purchase price.
- Enter projected stabilized NOI.
- Enter expected exit cap rate.
- Read yield bridge and created value.
Frequently Asked Questions
Why bridge cap rates?
In-place cap rate (NOI/price today) understates value-add return. Stabilized cap rate (stabilized NOI / price) shows post-lift yield. Bridge lights up the lift contribution.
Yield on cost?
Stabilized NOI ÷ (price + capex). That's what the deal actually earns after improvements. Target 100-200 bps above market exit cap for meaningful value-add.
Exit reversion?
Exit value = stabilized NOI ÷ exit cap. Compare to buy price to size created value. 30%+ creation is a strong value-add; <10% is a yield deal in disguise.
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