Cap-Rate ROI Calculator
Translate annual vendor-spend leakage into property value created at your portfolio's cap rate. The math is one multiplication and one division — and the leverage is what makes vendor-anomaly work uniquely high-impact on the balance-sheet side.
Total AP / vendor invoice volume per year
Industry research: 3–8% for unmonitored portfolios
FL secondary-market retail: 6.5–7.0%
Modeled annualized recovery
$15,000
= annual vendor spend × estimated leakage rate
Property value rescued (at this cap rate)
$230,769
= recovered annualized savings ÷ cap rate
These are modeled values, not delivered results. The leakage rate is the parameter you are testing — actual recoveries depend on the spend mix, contract structures, and what the audit actually surfaces. Cap-rate translation assumes the savings are durable (vendor contracts renegotiated) and the cap rate at the time of valuation matches the rate entered here. Sensitivity analysis on each input is part of every Phase 1 audit deliverable.
How the Math Works
Two operations, three inputs. The point of this tool is sensitivity intuition — you should leave knowing which input dominates.
Step 1 — Annualized recovery
`recovery = annual_vendor_spend × estimated_leakage_rate`. The leakage rate is the unknown — industry research suggests 3–8% on unmonitored CRE portfolios, with our Phase 1 audits frequently surfacing higher rates on specific vendor categories (haulers, utilities, landscaping).
Step 2 — Cap-rate translation
`property_value_rescued = annualized_recovery ÷ cap_rate`. This is the math that makes vendor-anomaly work asymmetrically high-leverage for owners — every dollar of durable operating recovery flows through the cap rate into balance-sheet value.
Step 3 — Sensitivity analysis
Toggle each input independently to see how brittle the projection is to your assumptions. The leakage-rate input is the highest-uncertainty parameter; cap rate is the highest-impact parameter; vendor spend is usually known precisely. Phase 1 audits ship a full sensitivity table as part of the deliverable.
Worked Example
The canonical $1M-vendor-spend / 5%-leakage / 5%-cap-rate case where the math returns $1M of property value. The 20x leverage is what makes the discipline worth a dedicated practice.
| Input / Output | Value | Note |
|---|---|---|
| Annual vendor spend | $1,000,000 | Example mid-size portfolio |
| Estimated leakage | 5% | Industry-research midpoint (3–8%) |
| Annualized recovery | $50,000 | = 1M × 5% |
| Cap rate | 5.0% | Lower than FL secondary-market; primary urban |
| Property value rescued | $1,000,000 | = 50K ÷ 5% |
What This Tool Is Not
This is a sensitivity tool, not a quote. The leakage rate is the parameter you are testing — actual recoveries depend on the spend mix, contract structures, vendor history quality, and what the audit actually surfaces against your specific portfolio.
The cap-rate translation assumes the recovered savings are durable (vendor contracts renegotiated, not just flagged) and that the cap rate at the time of valuation matches the rate you entered. Both assumptions deserve sensitivity analysis, which is part of every Phase 1 audit deliverable rather than a calculator input.
The conservative posture is to model with 3% leakage and your portfolio's current cap rate (often slightly higher than you would assume), then treat the output as the floor. The discovery process either confirms or substantially exceeds that floor; the audit itself does not require committing to anything beyond data sharing.
Run the math on your own portfolio
A Phase 1 audit takes a CSV export of your AP / vendor ledger and returns the flagged-anomaly report with cap-rate-translated dollar impact. The audit is the deliverable; continued engagement is a separate decision after you see the numbers.