Cap Rate Math: Don't Trust Their NOI! #shorts
In this short dialogue, two speakers dissect a commercial real‑estate valuation for a car‑wash property. Speaker A questions the advertised 12% cap rate, suspecting the underlying Net Operating Income (NOI) is inflated. They recalculate the cap rate after a proposed cash offer drop from $3.7 M to $2.1 M, noting that a lower purchase price raises the cap rate. They then examine the Debt Service Coverage Ratio (DSCR) assuming the full $2.1 M is financed, asking what the resulting DSCR would be. Finally, they discuss a risk‑adjusted required yield of about 12% versus what they believe is a realistic market yield for a car‑wash (around $150 k NOI, implying a 7.2% cap). The conversation highlights skepticism toward the seller’s numbers and the importance of re‑doing the math before committing to a deal.
