Reversion Value Calculator

Reversion (or terminal) value is the estimated sale price at the end of the hold period. It usually drives 60-80% of IRR in a DCF, so small assumptions make big impact. This calculator computes reversion from exit-year NOI and terminal cap rate.

Year-1 NOI

Annual NOI growth

Hold years

Terminal cap rate

Selling costs

Net reversion proceeds

$4,680,685

Exit-year NOI

$298,513

Gross reversion value

$4,776,209

Selling costs

$95,524

How the math works

Reversion = exit NOI ÷ terminal cap rate, minus selling costs. In a 7-year hold with 3% NOI growth and entry NOI of $250k, exit NOI is ~$299k. At a 6.25% exit cap, reversion ≈ $4.79M before selling costs.

Reversion sensitivity: a 25bps cap move changes reversion by ~4% on a 6% cap; on a 4% cap, it's ~6%. That's why institutional LPs cap-weight projections and stress-test.

How to Use

Enter year-1 NOI.
Enter annual NOI growth rate.
Enter exit year (hold period).
Enter terminal cap rate.
Enter selling costs (as % of reversion).
Read gross and net reversion value.

Frequently Asked Questions

How to pick terminal cap rate?

Typical practice: entry cap + 25-75bps to account for the building being older at sale. In falling-rate markets, underwriters sometimes hold flat. For institutional exits, align with comps for the asset class in year-N projected.

What selling costs apply?

Brokerage (1-3% for institutional, 4-6% for smaller deals), legal, title, transfer tax, prepayment penalty on existing debt, and possibly defeasance. Total commonly 2-5% for institutional, 6-8% for mid-market.

What if reversion NOI drops?

Sensitize. A 10% miss on exit NOI combined with 50bps cap expansion can wipe out 30-40% of projected reversion. Always stress-test — that's why bridge-to-permanent deals blow up.