What is a "Cap Rate" and How is it Calculated? ➗ ✖️➕➖
Автор: REtipster
Загружено: 2020-08-10
Просмотров: 39928
Cap Rate Calculator: https://retipster.com/terms/cap-rate/...
Table of Contents
0:00 - What is a Cap Rate?
0:36 - Cap Rate Formula Explained
1:02 - What is Net Operating Income (NOI)?
1:50 - What ISN'T Included in a Cap Rate?
2:51 - The Most Useful Way to Calculate a Cap Rate
3:06 - Cap Rate Example
4:06 - The Pros and Cons of Using Cap Rates
Capitalization Rate – or “Cap Rate” for short – is one of those terms that needlessly intimidates new real estate investors.
Don’t be daunted! It’s a very simple concept; you can master it in under five minutes.
Here’s what new investors need to know about cap rates, how to calculate them, and even a few handy calculators to run the numbers yourself (you can see an ultra-simplified version above and a more advanced version of this calculator below).
What is a “Cap Rate”?
A cap rate is simply a ratio of a property’s income over its cost or value.
It’s a number that helps investors convert a property’s income into value.
It’s one way (but not the only way) of measuring the rate of return for an income-producing property.
The cap rate is the answer to a fundamental question:
“For every dollar this property costs to acquire, how much can you expect to receive back each year in net rental income?”
Another way to think about cap rates is annual yield, similar to the dividend yields for stocks.
How Are Cap Rates Calculated?
The math behind cap rates is simple enough:
Net Operating Income / Market Value or Cost = Cap Rate
Again, it’s just a ratio of income over cost. But both components in the equation need further explanation, which we'll cover in this video.
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