Exit cap rate

The cap rate an investor assumes will apply when they sell the property years from now. Used to project the future sale price. Small changes in exit cap rate can swing projected returns a lot.

Investment terms · Updated September 2026

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Part 1 of 4

Why a seller cares

The exit cap rate is what an investor assumes the market will pay when they sell years from now, and it drives their whole projected return. A buyer who assumes a low exit cap can justify paying more for your building today.

Part 2 of 4

A simple example

A buyer projects your building's NOI at $60,000 in five years. At a 6% exit cap that is a $1,000,000 sale; at 7% it is about $857,000.

Exit cap rate: a simple example
The assumptionThe projected sale
Exit cap of 6%$1,000,000
Exit cap of 7%About $857,000
The difference$143,000 of projected return riding on one percentage point

The exit cap is a guess about the future, and the return depends on it more than on anything else.

Part 3 of 4

What people get wrong

That the exit cap is the cap rate today. It is the buyer's assumption about a market years away, and it is usually optimistic.

Part 4 of 4 · where to read next

Where it appears in the sale

What a definition is, and what it isn't

Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.

Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish

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