VALUATION GUIDE
How to Calculate Yield on Cost
Yield on cost compares stabilized annual NOI with the full project cost basis.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Include land, transaction costs, hard costs, fees, contingency, finance and other project costs in the denominator unless you label a narrower measure.
Calculation framework
Use stabilized NOI based on sustainable occupancy and operating costs. Avoid using a partial lease-up year or a peak promotional year.
Underwriting review
Compare yield on cost with the market cap rate using consistent NOI definitions. The spread helps compensate for development risk but is not a return forecast.
How to use the result
Review IRR, equity multiple, time to stabilization and downside liquidity alongside yield on cost. It does not reflect when costs are paid.