What Is Exit Cap Rate?
The exit cap rate — also called the terminal, reversion, or going-out cap rate — is the capitalization rate used to estimate a property's resale value at the end of a projected holding period, applied to the year-following-sale NOI.
Formula
Estimated Sale Price = Year-Following-Sale NOI ÷ Exit Cap Rate
Why It Matters
Since it's a forecast years into the future, the exit cap rate is typically assumed to be somewhat higher than today's going-in cap rate, reflecting the uncertainty of predicting market conditions that far out.