Market Extraction Method

A real estate to be purchased

Units	60
Price	$40,000,000
Net Operating Income (for the first year after the sale)	$4,200,000
Historical annual growth rate of NOI	5%
Investment horizon	5 years
Selling price	$45,000,000 $60,000,000

A real estate similar to the real estimate above

Average selling price (per unit)	$1,250,000
Annual net operating income (per unit)	$135,000
Annual gross operating income (per unit)	(1/0.80)*$135,000

Market extraction method:
Capitalization Rate R₀ = NOI/MV = $135,000/$1,250,000 = 10.80%