Going-In Cap Rate
The capitalization rate at acquisition, calculated by dividing the property's first-year or in-place NOI by the purchase price.
Definition
Going-in cap rate is the entry yield on a purchase: first-year (or trailing / in-place) net operating income divided by the all-in purchase price. Buyers use it to compare deals on a same-day income basis before modeling rent growth, expense inflation, or an exit. Sellers and brokers often quote going-in on T12 or in-place NOI; buyers may recompute it on their own NOI stack after vacancy, credit loss, and unrecovered OpEx adjustments. In small bay industrial, going-in can look strong on a full rent roll and weaker once you mark vacant units to downtime or mark below-market leases to market with explicit downtime. Going-in is not the same as exit cap rate or yield on cost. Exit is the assumed sale yield at the end of the hold. Yield on cost divides stabilized NOI by total project cost for development or value-add plans.
Formula
Going-In Cap Rate = Year-1 (or In-Place) NOI / Purchase PriceExample
A buyer pays $4,000,000 for a 28-unit flex park. Trailing NOI is $280,000. Going-in cap rate = $280,000 / $4,000,000 = 7.0%. If the buyer underwrites $20,000 of additional vacancy and unrecovered OpEx, their going-in on adjusted NOI is $260,000 / $4,000,000 = 6.5%.
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