cap rate

In Selling Property - Asked by Marion T. - Sep 8, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

Are you asking what cap rate is? If so, cap is merely the relationship of the price to the income expressed as a percentage (NOI/Price=Cap). In other words if you have a property that nets $10,000 and you pay $100,000 you get a 10% cap. Your net return on your $100K is 10%. Cap only looks at a 1 year period and does not include debt. If you want to see how a property might perform over a period of years and include debt you will need to look at IRR (internal rate of return). IRR can take into account debt, multiple years, variable cash flows and expenses. Cap is useful in determining how one property compares to a similar property. The higher the cap the lower the price relative to the income it produces. If you need more info please email me at pstoski@yahoo.com
Paul Sylvester,CCIM

Sep 8, 2009
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Gregory G.
Broker/Agent
San Francisco, CA

This was a stimulating question.
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Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com

Oct 23, 2009
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Chris S.
Broker/Agent
Coeur D'alene, ID

= nothing more than a ratio between income and sale price

Jan 22, 2010
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