What Is Cap Rate?
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Incidentally if any of this information is coming as a revelation to you then you probably have no business investing in real estate.
If you want to invest in commercial real estate the first thing you need is capital, your own money... Then maybe you can get some financing as well. And the property? Go knock on doors, talk to business owners who are retiring, going out of business ect. Make deals directly with owners. Use an attorney, bypass the freakin realtors! Maybe then you can make 10%.
embracingreality 3 months ago
Not quite true, the denominator should be the current value of the property. What is being presented is the CAP rate at purchase.
1too3fore 3 months ago
@MrMikedoty You aren't doing anything wrong. .073175 converts to 7.3%
martinofhouston 11 months ago
A property is asking 3,600,000 it's NOI is 263,430 answer I get is the cap rate 0.073175 what am I doing wrong?
MrMikedoty 1 year ago
@Chrisnoscrub047 You have to look at the area where the property is being sold, then you need to divide their net operating income/sales price, this gives you the estimated cap rate.
75,000/3.75MM = .02 this is the same as
75,000/.02/= 3.75MM
This is only achieved through the net operating income.
If they are lowballing you on your offer, its because you're operating expenses are too high, and must be reduced to have a higher NOI. The higher NOI, the higher the sales price.
laythesmack23 2 years ago
hey! thanks for putting out these videos. How do you find out the current market cap rate for properties in your area. For example, someone has made an offer on my property but their offer was based on a certain cap rate. I don't know if that is the current market cap rate. If it is higher than mkt than they're getting too good of a bargain on my property. I have a hard time believing that it is lower than the mkt cap rate.
Chrisnoscrub047 2 years ago