Cap Rate 101: How to Calculate Capitalization Rates in Real Estate

Whether you're a seasoned investor or new to real estate, this guide will help you understand what cap rates are, why they're important, and how to calculate them. By the end of this video, you'll be equipped to use cap rates effectively in your investment decisions, ensuring you can determine if you're getting a good deal or not.

00:00 - Introduction
01:51 - Key Components of Cap Rate: Net Operating Income (NOI)
02:56 - Understanding Operational Expenses
03:46 - Common Mistakes in Cap Rate Calculations
04:41 - Practical Calculation of Cap Rates
05:43 - The Importance of Accurate Operational Costs
06:41 - Cap Rate Case Study and Homework Assignment
09:27 - Monthly vs. Annual Income Calculations
10:20 - Real-Life Scenario: Determining Gross Annual Income
11:17 - Estimating and Deducting Operational Expenses
12:14 - How Investors Use Cap Rates
19:13 - The Role of Location in Cap Rates
21:41 - How to Find Cap Rates in Your Area
24:11 - Limitations of Cap Rates
25:17 - Cap Rates for Different Property Types
26:50 - Strategies for Increasing Cap Rates
29:15 - Summary and Final Thoughts

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Juan is a Licensed California Real Estate Broker that has acquired his Certified Commercial Investment Member (CCIM) designation and a Real Estate Investor who is dedicated to helping people build wealth and financial independence through real estate investing.

Juan specializes in selling multifamily apartment units as well as residential properties. He prides himself in locating value-added properties that maximize the client’s investment yields. Juan is a detail-oriented entrepreneur.

Today he handles everything from finding, funding, designing, managing, and selling investment properties. His diverse experience in commercial and multifamily real estate allows him to develop and navigate a wide range of projects.

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