Band Mortgage Equity Capitalization or Atkerson format Ellwood
Originally published: 04/10/2016 21:10
Last version published: 25/03/2019 15:45
Publication number: ELQ-60041-2
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Band Mortgage Equity Capitalization or Atkerson format Ellwood

Incorporate and understand a financing's impact on value and compute the cap rate.

This is the classic Ellwood Method of deriving a cap rate updated to allow for compounding of Net Operating Income (NOI) over time and useful for examining assumptions behind market cap rates.

This tool is ready-to-use, and users are available to input their own data freely. It is also available to download instantly.

The Mortgage Equity Technique, also known as the Ellwood Method, is reliant upon the Time Value of Money concept and generates the cash flows values that will be produced during an investment. This method can be better than using other methods, such as the Band of Investment, as it more accurately displays the property transaction for a piece of real estate.

The data inputs that are required from the user are as follows:

- NOI Year 1
- NOI Growth Rate Per Year
- Equity Yield Target
- Mortgage Rate
- Amortization Term Yrs
- Loan to Value ratio
- Holding Period
- Transactions costs at sale

The Outputs that are produced by this model are as follows:

- Cap Rate
- Value
- Debt Coverage Ratio (DCR)

If you have any questions or remarks on this Mortgage Equity Capitalization, don’t hesitate to start a discussion below or privately message me via my Eloquens author channel. If you’ve found this tool useful, please show your appreciation by leaving a 5* rating or a review!

- Prof. Norm Miller, PhD

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