In recent posts I’ve been revisiting some key real estate investment metrics. Last time I discussed the finer points of Net Operating Income, and that topic should serve as an appropriate run-up to the subject of capitalization rates (aka cap rates). What are they and how do you use them?
Income capitalization is the technique typically used by commercial appraisers, and is a part of the decision-making process for most real estate investors as well. I invite you to jog over to an article I’ve written on the subject:
Estimating the Value of a Real Estate Investment Using Cap Rate
In addition, you can download Chapter 10 of my book, Mastering Real Estate Investment, which discusses cap rates and gives you several examples you can work through.
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