Different methods to evaluate a multi-unit residential property
In general, NOI is calculated on a monthly basis using monthly income and expense data, and can then be converted to annual data simply by multiplying by 12.
Subtract the money out for debt service.
Subtract any capital expenditures.
This would be money spent for improvements on the property, whether they are deductible that year or not. This is actual cash spent.
Add any loan proceeds.
This is the money borrowed on a loan other than the original mortgage. If you made capital improvements, but took out a loan to pay for it, put that loan amount here as an addition.
Add any interest earned.
Should the property have loans or investments out that provide cash in as interest, add that in here.
As U.S. real estate sale prices have declined faster than rents due to the economic crisis, cap rates have returned to higher levels: as of December 2009, to 8.8% for office buildings in central business districts and 7.36% for apartment buildings – as per the Wall Street Journal