At the bottom of this post is a downloadable practice tool for the A.CRE Method for doing cap rate mental math. The tool will generate an endless number of random cap rates and NOIs to practice with and will walk you step by step through how to solve for each scenario you are working in. You can read through this quick step-by-step guide and also watch the video below for instructions. Also, if you have not read the original post, please click here to learn more.
Step by Step Guide
The tool is an excel based file with three tabs: (1) a Prompt tab, (2) an Answer tab, and (3) an Explanation tab.
The Prompt tab is where you will be given a random cap rate and NOI to solve for the property value. Simply click F9 to generate new prompts. Cell C13 is a drop down menu that will allow you to change the range of the NOIs you are practicing with. You can pick NOI ranges from the $10,000’s to the 100,000,000’s as shown in the screenshot below.
The answer tab gives you both the exact answer and the approximate answer you should have come up with using the method. Keep in mind that your approximate answer may be different from what is shown. As long as you are within 5% or so of the actual answer than consider yourself right. Doing cap rate math in your head is supposed to provide approximate answers, not exact answers.
The Explanation tab walks you step by step through the process of how you would think about solving this using the A.CRE Method. The explanation tab is pretty thorough, but if you are unclear about a step or need to refresh, go back to the original post and you can reread about the process and also practice each step with the flash cards.