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Yield Shift Calculator

A modest cap rate move has a big price impact. This calculator quantifies the value change from a specific yield shift.

$
%

Value change

-$769,231

Value before

$10,000,000

Value after

$9,230,769

How the math works

Value change = (NOI / new cap) − (NOI / old cap). Lower caps lift value, higher caps crush it.

Stress-test every deal for a 100bps cap expansion. A 6% cap going to 7% drops value ~14%; that can wipe out equity on highly levered deals. Build reversion cushion into pricing.

How to Use

  1. Enter NOI.
  2. Enter starting cap rate.
  3. Enter cap rate shift (bps, + expands).
  4. Read value before/after and delta.

Frequently Asked Questions

Why so sensitive?

Value = NOI ÷ cap. Small cap changes swing value a lot because it's a division. A 50bps expansion on a 6% cap = 8.3% value drop even with unchanged NOI.

When do caps shift?

Rate cycles (10Y rises → caps rise). Credit spreads widening. Investor sentiment. Asset-class specific — office caps can shift independently of multifamily.

How to hedge?

Lock rate with interest-rate cap (financial). Increase NOI to offset cap expansion. Exit early before cap compression ends. Build reversion gain into underwriting.

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