The “$1 Rent = $200 Value” Rule

The “$1 Rent = $200 Value” Rule

The “$1 Rent = $200 Value” Rule

This shortcut comes directly from the core formula:

Value = NOI ÷ Cap Rate

But investors simplify it so they can estimate value instantly.

Step 1 — Convert Rent to Annual NOI

Every $1 rent increase per unit adds:

$1 × 12 months = $12 per year

So:

$1 rent increase = $12 NOI per unit

Step 2 — Convert NOI to Value

Now divide by the cap rate.

Example using a 6% cap rate

12 ÷ 0.06

= $200

So:

$1 rent increase per unit = about $200 in property value

The Shortcut

At a 6% cap rate

Rent IncreaseValue Created Per Unit
$1~$200
$10~$2,000
$100~$20,000

That’s the entire rule.

Example (20 Unit Property)

Rent increase

$200

Value created per unit

$200 × 200

= $40,000 per unit

Now multiply by units.

40,000 × 20 units

= $800,000 value created

Just raising rent $200 created $800K.

Larger Example (50 Units)

Rent increase

$300

Value per unit

$300 × 200

= $60,000 per unit

Total value created

60,000 × 50

= $3,000,000 value increase

Why Investors Love This Rule

It lets you evaluate a property in seconds.

When you walk a building you immediately ask:

• What are current rents?
• What are market rents?

The difference is the rent gap.

Then you estimate value.

Quick Zia Training Rule

If cap rate ≈ 6%

$1 rent increase ≈ $200 value per unit

Formula for fast estimate:

Rent Gap × 200 × Units = Approx Value Created

Example Zia Should Memorize

Property

24 units

Rent gap

$500

Value created

500 × 200 × 24

= $2,400,000 value increase

Why Grant Says Deals Are Everywhere

Because many small apartment owners have:

• rents $300–$900 below market
• outdated units
• poor management

That means the value is hidden in the income.

When This Rule Changes

The $200 number depends on cap rate.

Cap RateValue per $1 Rent
5%$240
6%$200
7%$171

So investors often remember it like this:

$1 rent = $170–$240 value

One Line to Remember

Rent Gap × Units × 12 ÷ Cap Rate = Equity Created

That one formula explains why a small apartment deal can create millions in value.

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