Sixty seconds. No site address. Start with the income.

What can you afford to pay for this site?

Most people buy a site and hope the numbers work. Start at the other end. Estimate what the finished asset could earn, work out what a buyer would pay for that income, and work backwards to the most you can afford to pay. No jargon assumed. The one term you need is explained on the way through.

What will the finished asset earn?

Weekly rent for each dwelling once the project is complete.

Existing dwelling, weekly rent

New dwelling, weekly rent

Add another income stream

Additional dwelling or other weekly income

$4,000Combined weekly income

× 52 =

$208,000Annualised income

What is that income worth to a buyer?

This is where the cap rate comes in. If you have never heard the term, read the next few lines once. It is the most important number in the whole calculation, and it is simpler than it sounds.

A cap rate, short for capitalisation rate, is the annual rent as a percentage of what buyers actually pay for that kind of income-producing property. It is measured backwards from real sales. If dual income properties in an area are selling at prices where the combined rent works out to 3.2% of the price, the cap rate there is 3.2%. It is the return the market is prepared to accept for that income.

Turn it around and it is a multiplier. At 3.20% a buyer is paying about 31 times the annual rent. So $208,000 a year of rent is worth about $6.5m to that buyer.

The lower the rate, the higher the value. A low rate means buyers accept a smaller return because they expect the asset to hold or grow its value, so they pay more for every dollar of rent. A high rate means the opposite. Same rent, very different price.

Indicative cap rate

Where does the number come from?

A valuer, or a commercial agent who sells income property, can tell you what rate comparable dual income or multi-dwelling sales have achieved. If you do not have one yet, leave the default and use the guide below to test the range. Use the full rent before costs, against a gross rate.

What moves a cap rate, and the typical ranges

Pushes the rate down, so value up

Scarcity and strong owner occupier demand: beach suburbs, inner city, water or views
A good quality, newer main dwelling. The main dwelling carries the number
Consistent tenant demand from a broad pool, not one employer or one university

Pushes the rate up, so value down

Older or poorer stock, mining town exposure, commission housing pockets
Student areas where tenancies churn and rents are lumpy
Large mixed-quality suburbs, where the valuer picks the end that matches the street

Typical gross cap rate ranges for dual income residential property
Premium coastal and inner city, quality dwelling	3.0% to 4.0%
Established suburbs with strong tenant demand	4.0% to 5.0%
Outer suburbs and regional centres	5.0% to 6.0%
Older stock and single-employer towns	5.5% to 6.5%

Indicative ranges from Henderson's own reference for dual income residential property, September 2026. They are not valuer confirmed and they are not a valuation. An income capitalisation approach is not automatically the right methodology for every residential asset. Whether it applies, and what rate is appropriate, depends on the property, the location, market conditions, the evidence available and the valuer or lender involved. The valuer instructed on your project sets the rate that counts.

Indicative end value $6.5m $208,000 a year capitalised at 3.20%

The same income, one point either side

Nothing about the property changed between these three figures, only the rate a buyer would accept. That is why the cap rate matters more than any other assumption here, and why every figure on this page is indicative.

What will it cost to create?

Everything between the site and the finished asset.

Estimated construction cost

Approvals, consultants, holding and other costs

Equity or profit margin you require

See your maximum site price and full sensitivity analysis

You have your indicative end value. The rest of the feasibility, the maximum you can pay, the equity the project could create and how it all moves when the assumptions change, is one step away.

Your HEF feasibility, indicative

Forecast equity created

$1.45m on a total project cost of $5.05m

The project

Purchase price: $2,500,000
Construction: $2,200,000
Other costs: $350,000
Total project cost: $5,050,000

The finished asset

Combined weekly income: $4,000
Annual income: $208,000
Selected cap rate: 3.20%
Indicative end value: $6,500,000

$1,450,000Forecast equity created

28.7%Return on cost

22.3%Equity margin on end value

Change the assumptions

Move any of these and every figure above updates. This is the part worth playing with.

Combined weekly rent $4,000

Purchase price $2,500,000

Cap rate 3.20%

Construction cost $2,200,000

The cap rate is an assumption, not a fact

The same income at three different rates. A softer rate lowers the capitalised value even when the rent does not change, which is why the base case should never be read on its own.

Want Henderson to run the full feasibility?

This gives you an initial indication of the numbers. Our team assesses the complete opportunity: acquisition, rental assumptions, planning, site configuration, construction, costs, finance, valuation assumptions and equity potential.

Assess my HEF opportunity

The opportunity gap

HEF looks for the gap between what a property costs and what its completed income can support. Two things widen that gap, and they can happen at the same time.

Scenario A

Purchase price: $3,000,000
Combined rent: $3,400 a week
Annual income: $176,800
Cap rate: 3.20%
Indicative end value: $5,525,000
Construction and other costs: $2,000,000
Total project cost: $5,000,000
Indicative equity created: $525,000

Scenario B

Purchase price: $2,500,000
Combined rent: $4,000 a week
Annual income: $208,000
Cap rate: 3.20%
Indicative end value: $6,500,000
Construction and other costs: $2,000,000
Total project cost: $4,500,000
Indicative equity created: $2,000,000

Same construction cost, same cap rate. A lower acquisition price and a stronger completed income, and the indicative equity moves by nearly $1.5m.

Why multiple income streams matter

An existing dwelling at $2,000 a week and a new dwelling at $2,000 a week is $4,000 a week combined, or $208,000 a year. At a 3.20% cap rate that capitalises to $6.5m. Development creates income, income supports the valuation, and the valuation is where the equity comes from.

Why rent matters so much

Under an income based approach, every extra dollar of sustainable income has an amplified effect. At a 3.20% cap rate an additional $10,000 a year is $312,500 of capitalised value. An extra $20,000 is $625,000. An extra $30,000 is $937,500. That is why design, product, location and achievable rent matter as much as build cost. It is not about building as cheaply as possible.

Why purchase price matters

Every dollar saved on acquisition comes straight off total project cost. If the end value assumptions hold, buying at $2.5m instead of $3m adds $500,000 of project margin. This is why a softer acquisition market is not automatically a worse market for this kind of project.

The HEF paradox

Sometimes a weaker property market creates a stronger development opportunity. We are not relying on an existing property rising in value. We are manufacturing the characteristics that create value: acquire well, build strategically, create multiple income streams, lift sustainable rental income, control construction cost, and finish with an asset worth materially more than it cost to create.

Most property investors ask how much will the market go up?

HEF asks how much value can we manufacture?

The difference is control. What you pay, what you build, what it costs, what income it can sustainably generate, what valuation methodology is appropriate, and the margin between total cost and indicative end value. Those are the inputs worth arguing about.

Do not buy the site and hope the numbers work

Work out the numbers, then decide what you can afford to pay. If the project looks like it stacks up, we will assess the whole opportunity with you.

Assess my HEF opportunity

This calculator provides an indicative feasibility only. It is not a property valuation, a formal feasibility study, financial product advice, credit assistance, tax advice or legal advice, and it does not guarantee any investment outcome. Income capitalisation is not automatically the appropriate valuation methodology for every residential asset. Whether it applies, and what rate is appropriate, depends on the property, the evidence available, the sustainability of the income, market conditions, the valuation methodology adopted and the requirements of the valuer or lender involved. Rental income, construction costs, approval and holding costs, capitalisation rates and end values entered or shown here are assumptions, not forecasts, and are not guaranteed. Figures are rounded. The calculator does not account for GST, stamp duty, land tax, capital gains tax, selling costs, finance costs beyond any amount you enter, planning risk, construction risk, delays or vacancy. The maximum site acquisition price shown is the arithmetic remainder of your own assumptions and is not a recommendation to pay that price. Henderson Advocacy is a property buyers agency and does not hold an Australian Financial Services Licence or an Australian Credit Licence. Confirm any valuation, structure, tax, planning or lending decision with your own valuer, accountant, solicitor and broker before you act.