How To Calculate Yield On Cost Real Estate
JB
Jeremiah Boucher Founder, Patriot Holdings • Author of Finding Your Edge
Key Takeaways
- Yield on cost = Stabilized NOI / Total Cost (purchase + renovation) — it measures the return on your total investment.
- If your yield on cost is higher than the market cap rate, you've created value through the business plan.
- Target a yield on cost that's 150-200 bps above the market cap rate — that's your value-add spread.
- This metric separates good operators from speculators — it measures what you built, not what you bought.