Question

What is your YOC (%)? Please show the calculation. Information Provided: Market Rents are $5 NNN per square foot (psf) Land, Hard, Soft & Financing Costs total $75 psf Market Exit Cap Rates are 5%

Answer 1

YOC = Yield on Cost

Yield on Cost (YOC), generally speaking, is the annual rate of return from a security or an investment; i.e. the annual return received from the investment divided by the average cost of the investment.

In the question, the investment is the property and the return from this investment will be the Rent to be received by the owner. Noteworthy is the point that, YOC does not consider the appreciation in the value of the asset (real estate property in this case). Although, we can calculate the Expected Sales Price of the property using the Market Exit Cap Rate and the Rent, but it is not needed in the question.

So,

Yield on Cost (YOC) = Rent from the Property/Cost of Acquiring the Property

Here,

Rent = 5 $ psf    (Given in the question)

Hard, Soft, & Financing Costs = 75 $ psf   (Given in the question)

YOC = 5/75 = 6.67%

Hope this helps....!!