Free investor tool
Commercial yield and value calculator
Work out a commercial property's net income and yield, and what it is worth at a market capitalisation rate.
Updated · Free, no sign-up
| Cap rate | Value | Against the price |
|---|---|---|
| 5.25% | $1,908,571 | $408,571 |
| 5.75% | $1,742,609 | $242,609 |
| 6.00% | $1,670,000 | $170,000 |
| 6.25% | $1,603,200 | $103,200 |
| 6.50% | $1,541,538 | $41,538 |
| 6.75% | $1,484,444 | −$15,556 |
| 7.25% | $1,382,069 | −$117,931 |
How it works
How commercial property is valued
Commercial property is priced mainly on its income. The net income is the rent less any outgoings the owner pays and cannot recover from the tenant. Dividing that net income by a capitalisation rate (the yield buyers accept for that type of property, tenant and location) gives the value. A lower cap rate means a higher price for the same income.
That is why small changes matter. On $100,000 of net income, a cap rate of 6% gives a value of about $1.67 million and 6.5% gives about $1.54 million. The right rate depends on the lease, the tenant's strength and comparable sales, so treat the result as a guide and rely on a valuer and recent sales before you offer.
The numbers are one part of the decision
We look at the figures alongside growth drivers, vacancy, supply and how a property fits your borrowing and portfolio plans, then choose the market that suits your strategy, wherever it is in Australia. See how we buy investment property.
FAQ
Common questions
What is a capitalisation rate?
The net income of a property divided by its price or value, as a percentage. It is the yield buyers are accepting for that kind of property. Secure, long leases to strong tenants in good locations sell on lower cap rates than short leases or weaker tenants.
What is the difference between gross and net yield?
Gross yield is the rent divided by the price. Net yield uses the rent after outgoings the owner pays, such as rates, insurance, land tax and management that the lease does not pass on. Commercial property is normally compared on net yield.
Who pays the outgoings on a commercial lease?
It depends on the lease. Under a net lease the tenant pays most outgoings on top of the rent; under a gross lease the rent includes them and the owner pays. Some states limit which outgoings can be recovered from retail tenants.
Is this financial advice?
No. It is a general estimate to help you compare options. It does not consider your personal circumstances, and results depend on the figures you enter. Check them with your accountant, mortgage broker or financial adviser before you act.
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