Commercial Property Valuation Calculator

Estimated Value is NOI divided by Market Cap Rate, so the cap rate acts as a required-yield denominator, not a cost. A lower cap rate means investors in that market are willing to accept a lower annual return relative to price, which mathematically implies they'd pay more for the same NOI -- this is why cap rate compression (falling rates) tends to coincide with rising commercial property values, and rising cap rates with falling ones.

No -- Estimated Value comes purely from Net Operating Income divided by Market Cap Rate, and does not use Purchase Price at all. Purchase Price only feeds Value vs Price, which compares an asking or actual price against the income-based estimate to show whether that price reflects a premium or a discount, without altering the underlying valuation.

Market Cap Rate is an input you supply, representing the going rate for comparable properties, and it's what Estimated Value is calculated from. Actual Cap Rate is an output calculated the opposite direction -- Net Operating Income divided by Purchase Price -- showing the real return the entered purchase price would generate, which you can compare against Market Cap Rate to see if the deal is priced rich or cheap relative to the market.

The calculation follows the standard sequence: Effective Gross Income first adjusts scheduled rent down for realistic vacancy and collection losses, then Net Operating Income subtracts operating expenses from that already-adjusted income figure. Calculating expenses against full scheduled rent instead would overstate NOI, since a property rarely collects 100% of scheduled rent in any given year.

No -- the income approach is one of three standard appraisal methods, alongside the sales-comparison approach (pricing against recent comparable sales) and the cost approach (land value plus depreciated replacement cost of improvements). Professional appraisers reconcile all three rather than leaning on one, because each can diverge: the income approach is only as good as the Net Operating Income and cap rate you feed it, and a property can be worth more or less than its income suggests based on comparable sales or replacement cost.