Caught myself calculating cap rates wrong for like 2 years straight

I was looking at a small office building in Charlotte last month, running the numbers like I always do. Net operating income divided by purchase price, simple stuff. Then the broker calls me and asks why I'm missing the vacancy and collection loss line. I thought NOI already had that baked in. Turns out I was using gross potential rent this whole time, not effective gross income. My cap rates were always way too low, made every deal look worse than it actually was. Feel like a total idiot for not catching that sooner. Anyone else have a basic formula moment where you realized you were using the wrong inputs?

2 comments

2 Comments

dakota47910d ago

Mistakes like that usually hide in the steps we think we know best, not the hard ones.

jenkins.alice10d ago

That really does ring true, last time I checked my own work twice and still missed the obvious spot.