Understanding the RV Park Acquisition Process

Underwriting Valuation and Yield Curves

When underwriting commercial properties, it is essential to calculate the Net Operating Income (NOI) by taking the gross annual revenue and subtracting all operating expenses. Operating expenses include property taxes, insurance, utilities, property management fees, and general maintenance costs. It does not include mortgage payments (debt service) or capital depreciation.

The capitalization rate, commonly referred to as the cap rate, represents the rate of return on a real estate investment property based on the income that the property is expected to generate. Cap rates serve as a metric to compare different investment opportunities.