Updated over 5 years ago on . Most recent reply
Purchase Cap Rate vs. Pro Forma Cap Rate
What's the difference between Purchase Cap Rate vs. Pro Forma Cap Rate. I have been using the calculator and can't figure out the pro forma cap rate.
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Brandon Turner
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Brandon Turner
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Hey @Michael Letarte - good question.
So, the cap rate is the annual net income / value. But because some properties need repair costs, it's hard to know what they mean by "value."
So - purchase cap rate is the actual cap rate when it was purchased. The Pro Forma cap rate is based on the after repair value of the property. Does that make sense?