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BiggerPockets Daily
1120 - How To Calculate Cap Rate For Investment Properties by Paul Moore part 1
Nov 8, 2023
Real estate investor Paul Moore discusses how to calculate cap rate for investment properties, including a step-by-step formula and understanding its limitations. He explores factors affecting cap rates, cautions against relying on broker estimates, and provides an example of improving asset performance to enhance net operating income.
12:46
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Quick takeaways
- Calculating cap rate is crucial for real estate investors to assess the profitability of investment properties.
- Cap rates are influenced by factors such as location, property condition, rental income potential, market demand, and prevailing interest rates.
Deep dives
Understanding Cap Rate Calculation
The podcast episode explains the importance of calculating cap rate to determine the profitability of real estate investments. Cap rate is defined as the annual return from operations that an investor expects to receive for a certain asset in a specific market. By considering the net operating income (NOI) and the current market value of the property, investors can compare different investment opportunities to assess their potential ROI.
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Discover
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