Every row below is the same price and the same gross rent. Only the share of that rent which survives vacancy and expenses changes, and the going-in yield moves 3.00 points across the range. That is the whole case against pricing anything on a multiplier: it cannot see the column that decides the answer.
| Share lost to vacancy and expenses | NOI | Going-in cap rate |
|---|---|---|
| 25% | $750,000 | 7.50% |
| 30% | $700,000 | 7.00% |
| 35% | $650,000 | 6.50% |
| 40%This scenario | $600,000 | 6.00% |
| 45% | $550,000 | 5.50% |
| 50% | $500,000 | 5.00% |
| 55% | $450,000 | 4.50% |
A gross rent multiplier ignores expenses, vacancy, capital structure, lease terms and capital needs completely. Two buildings can trade at the same multiplier and produce completely different net operating income, which is what the table above shows in dollars. Use it to sort a list quickly and to notice an outlier; do not use it to price a building, and never compare one across property types or lease structures.
Everything above is computed in your browser. Nothing you type is sent to Altyst or to the site hosting this calculator, and this frame sets no cookie. It is arithmetic on the figures you entered, not investment or lending advice.
A multiplier sorts a list. Pricing a building takes the expense stack behind it, the debt it can carry, and every year of the hold. Altyst reads the documents and builds that.