Season 3, Episode 10: From the ValuVault – How to Use the Income Approach

Income-approach basics

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Net operating income (NOI) ÷ market cap rate = value
Why it matters — It’s the go-to method for retail, office, and industrial assets.
NOI pitfalls — Inflated rent rolls, missing expenses, or one-off “above-market” leases.
Cap-rate reality — Industrial still trades at ~6-8 %; riskier office assets push 8-10 %.

Real-world snapshot

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2025 investors chase logistics/warehouse deals; stable income keeps cap rates tight.
Higher office vacancies mean lenders demand bigger risk premiums (higher cap rates).

Quick example

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Strip center NOI → $150 K
Market cap rate → 7.5 %
Indicated value → ≈ $2 million
(Move the cap rate 50 bps and value shifts ± $130 K.)

What buyers & mortgage pros should do instead

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• Scrub every lease and trailing-12 expenses before you trust the NOI.
• Benchmark cap rates with local surveys (LoopNet, CoStar, brokerage research).
• Stress-test value: run a ± 50 bps cap-rate sensitivity.
• Coach borrowers—lenders will re-cast value if income or cap assumptions look thin.

🔗 Episode audio: ValuVault – How to Use the Income Approach
📚 Learn more: https://nationwideamc.com

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