Free calculator · Real Estate
Cap-Rate Expansion & Leverage
Isolates how exit cap-rate expansion hits property value and, magnified by leverage, the equity beneath it, holding NOI and debt fixed. Inputs are the NOI, the going-in and exit cap rates, and the loan-to-value ratio.
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
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Cap-Rate Expansion & Leverage
The deal (NOI & debt held fixed)
Going-in value (NOI ÷ going-in cap)
$10,000,000
Debt (65% LTV, fixed)
$6,500,000
Going-in equity
$3,500,000
Exit value (NOI ÷ 6.00%)
$8,333,333
Equity at exit (value − debt)
$1,833,333
Cap-rate move
+100 bps
exit − going-in
Asset value loss
16.7%
unlevered
Equity loss
47.6%
2.9× the asset loss
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This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.