How To Underwrite Cap Rates In Fulton County

If you are sizing up an investment in Fulton County, one number rises to the top fast: the cap rate. Still, the way you calculate it can swing widely once you plug in local taxes, insurance, and vacancy. You want a clear, local process that helps you compare deals the same way every time. This guide shows you how cap rates work, how Fulton County inputs affect your numbers, and a step-by-step framework you can use before you bid. Let’s dive in.

Cap rates at a glance

What cap rate measures

Cap rate is a quick, unlevered snapshot of income relative to price. The basic formula is:

• Cap Rate = Net Operating Income (NOI) divided by Purchase Price
• NOI = Effective Gross Income (EGI) minus Operating Expenses minus Non-discretionary Reserves (if you choose to include reserves for apples-to-apples comparisons)
• EGI = Potential Gross Rental Income minus Vacancy and Collection Loss plus Other Income

Use cap rate to compare properties on an income basis without the effects of financing.

What cap rate does not show

Cap rate does not account for leverage, tax impacts, future rent growth, or the timing of market cycles. It also misses tenant credit risk and deferred capital needs unless you reflect them in reserves or near-term capital plans. Treat it as a helpful snapshot, not a full picture of investor returns.

Fulton County inputs that change NOI

Property taxes

Georgia uses an assessed value that is a fraction of market value for ad valorem taxes. When you underwrite, convert the expected market value or purchase price to an assessed value and then apply the combined millage rate for the property’s taxing district. The high-level process is:

• Assessed value = State assessment fraction multiplied by market value. Verify the current assessment fraction with the Georgia Department of Revenue property tax guidance.
• Tax bill = Assessed value multiplied by the combined millage rate divided by 1,000.
• Get the exact parcel millage and current bill details from the Fulton County Tax Commissioner and parcel records from the Fulton County Board of Assessors.
• Purchases, major improvements, or changes in use can trigger reassessments. Review appeal timelines and typical practices before you finalize your pro forma.

Insurance and flood exposure

Insurance varies by building age, construction, replacement cost, claims history, and location. Some properties fall within FEMA Special Flood Hazard Areas, which can trigger lender-required flood insurance. Check the parcel’s flood zone at the FEMA Flood Map Service Center and obtain quotes from local insurance brokers. Plan for wind and hail deductibles as appropriate for the Atlanta metro.

Labor, utilities, and services

Operating expenses track regional wages and local utility rates. For labor benchmarks, use the Bureau of Labor Statistics Atlanta area data to sense-check management and maintenance costs. Pull historical electric, water, sewer, and gas bills when available, and clarify owner-paid versus tenant-paid utilities.

Rents and vacancy

Rents and stabilized vacancy differ across Fulton County submarkets, from the Atlanta core to suburban cities. Use market reports and local comps to set achievable rents and realistic vacancy or collection loss. For a broad benchmark, review the HUD Fair Market Rents for the Atlanta metro and supplement with current local reports and listings.

Local registrations and fees

Business licenses, inspection fees, and any rental registrations vary by municipality within Fulton County. Confirm requirements for the specific city, and include any recurring costs in your underwriting.

Step-by-step underwriting framework

Use this process to normalize assumptions before you compare cap rates across properties.

Step A — Establish stabilized revenue

1. Gather current rents and other income from leases and on-site sources like parking or laundry.
2. Set a vacancy and collection loss rate based on local data from market reports or comparable properties.
3. Calculate EGI = Potential Gross Income minus Vacancy and Collection Loss plus Other Income.

If current rents are below market, create both a current operations pro forma and a stabilized pro forma so you can see the path to stabilization.

Step B — Itemize operating expenses

1. Property taxes: compute using the Georgia assessment fraction and the parcel’s combined millage. Verify rules with the Georgia Department of Revenue and pull parcel details from the Fulton County Tax Commissioner and Board of Assessors.
2. Insurance: request quotes, and verify any flood insurance requirement using the FEMA Flood Map Service Center.
3. Utilities: separate owner-paid from tenant-paid and use historical bills where possible.
4. Management fees: confirm with local property managers for the asset type.
5. Repairs and maintenance: use historicals or per-unit or per-square-foot benchmarks.
6. Other line items: administrative, marketing, legal, landscaping, trash, security, HOA if applicable.

Convert expenses to dollars per unit per year or dollars per square foot per year for consistent comparisons.

Step C — Reserve for replacements and CapEx

Set an annual reserve for long-term capital items like roofs, HVAC, or parking lots. For multifamily, a per-unit reserve is common. For commercial, a per-square-foot reserve is typical. If you include reserves in your NOI, do it consistently across all deals you compare, and document your policy.

Step D — Compute NOI and cap rate

• NOI (stabilized) = EGI minus Operating Expenses minus Annual Capital Reserves
• Cap Rate = NOI divided by Purchase Price

Use the same reserve policy, vacancy assumptions, and tax treatment for every property you evaluate.

Step E — Normalize one-time items

Remove non-recurring income or seller-funded credits. If you must complete immediate major repairs post-close, either add that cost to your effective acquisition basis or reflect temporarily lower NOI until work is done.

Step F — Compare to market and run sensitivity

Compare your property’s computed cap rate to cap rates for similar assets and submarkets drawn from current Atlanta metro market reports. Then stress test your assumptions:

• Exit cap rate up or down 100 to 200 basis points
• Rent growth scenarios that are conservative, base, and aggressive
• Vacancy shifts of a few percentage points
• Expense inflation using regional wage and CPI assumptions

Step G — Separate financing from cap rate

Cap rates are unlevered. After you establish NOI and cap rate, layer in financing to estimate cash-on-cash return and IRR. Keep these levered metrics separate from your cap rate so you can compare the property to others on a clean operational basis.

Worked example for Fulton County (hypothetical)

The numbers below are for demonstration only. Replace each placeholder with actual Fulton County figures, including millage, assessed value fraction, rent comps, taxes, and insurance.

• Property: 8-unit multifamily in a Fulton County suburb
• Market rents (stabilized): average 1,200 dollars per unit per month
• Potential Gross Income: 1,200 × 8 × 12 = 115,200 dollars
• Vacancy and collection loss: 6 percent → 6,912 dollars
• Other income: 1,200 dollars per year
• Effective Gross Income (EGI): 115,200 − 6,912 + 1,200 = 109,488 dollars

Operating expenses per year (illustrative only):

• Property taxes: assume purchase price 1,200,000 dollars. For example only, if assessed value equals 40 percent of 1,200,000, assessed value equals 480,000. If combined millage equals 40 mills, tax equals 480,000 × 0.04 = 19,200 dollars. Always verify the current Georgia assessment fraction with the Georgia Department of Revenue and the parcel’s actual millage with the Fulton County Tax Commissioner.
• Insurance: 3,200 dollars
• Utilities (owner-paid): 6,000 dollars
• Management fee: 6 percent of EGI → 6,569 dollars
• Repairs and maintenance: 8,000 dollars
• Administrative and other: 2,500 dollars
• Total operating expenses: 45,469 dollars

Capital reserves:

• 600 dollars per unit per year → 4,800 dollars

NOI and cap rate:

• NOI (stabilized) = 109,488 − 45,469 − 4,800 = 59,219 dollars
• Cap Rate = 59,219 divided by 1,200,000 = 4.94 percent

Sensitivity prompts you can run:

• If market rent grows 3 percent next year, EGI rises and the cap rate increases even if expenses hold flat.
• If taxes are 15 percent higher after reassessment, expenses rise, NOI falls, and the cap rate drops.

Common pitfalls and smart habits

• Do not use seller’s one-time credits or temporary concessions in NOI. Normalize to stabilized operations.
• Always check parcel flood risk and insurance implications using FEMA’s map before you finalize numbers.
• Do not apply national expense ratios without adjusting for Atlanta-area wages and utility rates. Cross-check with BLS Atlanta data and local bills.
• Recognize vacancy differences across submarkets within Fulton County. Use submarket-appropriate assumptions.
• Document every key assumption: vacancy, reserves, management fee, tax millage, and rent comps.

Practical habits:

• Pull the exact parcel’s millage and compute taxes rather than guessing.
• Get at least one local insurance quote or broker estimate early.
• Build conservative, base, and optimistic rent and expense cases.
• Use consistent per-unit or per-square-foot expense normalizers across deals.

Bringing it together in Fulton County

Your cap rate is only as good as the assumptions behind it. In Fulton County, taxes, insurance, and submarket vacancy can shift NOI more than you think. If you set a consistent policy on reserves, normalize one-time items, and run sensitivities that reflect Atlanta’s market rhythm, you can compare properties fairly and move on the right ones with confidence.

Ready to underwrite your next deal?

If you want local guidance on rents, taxes, and on-the-ground operating costs across Metro Atlanta, let’s talk. Whether you are buying your first rental or adding to a portfolio, you deserve clear numbers and a calm plan. Reach out to Latrice Sells Homes to start your underwriting with confidence.

FAQs

How do I calculate property tax for a Fulton County parcel?

• Confirm the Georgia assessment fraction with the Department of Revenue, look up the parcel’s assessed value and millage via the Fulton County Board of Assessors and Tax Commissioner, then compute tax as assessed value multiplied by combined millage divided by 1,000.

Should I include reserves when calculating NOI for cap rate?

• Many conservative underwriters subtract annual replacement reserves from EGI along with operating expenses; choose a policy and apply it consistently across all deals you compare.

What is the difference between cap rate, cash-on-cash, and IRR?

• Cap rate is unlevered NOI divided by price, cash-on-cash includes financing and shows pre-tax cash flow on equity, and IRR measures the time-weighted return on all cash flows over the hold period.

Where can I find rent and vacancy benchmarks for Atlanta?

• Use a mix of market reports and listings, and for a broad baseline consult the HUD Fair Market Rents for the Atlanta metro, then refine with current local comps.

How should I handle reassessment risk after purchase?

• Model a scenario where taxes increase after sale or post-renovation, and use parcel data from the Fulton County Board of Assessors plus appeal timelines from the county to inform assumptions.