The cap rate matches "cash on cash" or the rate of return only when there is no debt against the real estate. Once you factor in the cost of debt you then need to compute "cash on cash" to determine cash flow.
This lesson appears to be more about "how to determine cap rate."
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
The cap rate matches "cash on cash" or the rate of return only when there is no debt against the real estate. Once you factor in the cost of debt you then need to compute "cash on cash" to determine cash flow.
This lesson appears to be more about "how to determine cap rate."
RunTMCfan 2 years ago
Cap rate is a ratio. It shows how the Net Income measures with the price or/appraised value.
jazznjava 3 years ago
So the Capitilazation rte is really just a factorin a mathematical equation right? It doesn't really signify anything else, does it?
Kravaritis 4 years ago