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BiggerPockets Daily

1121 - How To Calculate Cap Rate For Investment Properties by Paul Moore part 2

Nov 9, 2023
Real estate investor Paul Moore explains how to calculate cap rate for investment properties. Topics include various methods of analyzing properties, using cap rate as an analysis tool, and understanding the significance and factors influencing cap rates in real estate investment.
11:01

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Quick takeaways

  • The price per unit method fails to consider important elements like revenue, expenses, maintenance, and neighborhood factors, making it an incomplete evaluation of property value.
  • The Gross Rent Multiplier method, although dividing the property price by the annual gross rent, disregards expenses, maintenance, and market factors, resulting in an inaccurate determination of property value.

Deep dives

Methods of Analyzing Properties: Price per unit

The price per unit method, although popular for its simplicity, fails to consider important elements like revenue, expenses, maintenance, and neighborhood factors. Just comparing the cost per unit does not provide a complete evaluation of the property's value.

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