Cap Rate Quick Reference
Recall cap-rate formula, interpretation, and common traps under time pressure.
What is the cap-rate formula? Cap rate = NOI / value. Value = NOI / cap rate. Use decimal cap rates in the calculation: 6.5% is 0.065. Compare cap rate and cash-on-cash return. Do not call cap rate a levered yield. The broker says, It is a high cap, so it is obviously a good deal. You need a quick response without sounding dismissive. Your line High cap can mean attractive price or higher risk. Which NOI and risk assumptions are producing that cap? Treating high cap rate as automatically cheap ignores income durability and capital needs. The response keeps…
Sign up free — one personalized lesson every day, matched to your role and goals.
Already have an account? Sign in