Files & Resources: breakingintowallstreet.com/kb/real-estate-modeling/cap-rate/ Table of Contents: 0:00 Introduction 0:37 The Short Version 4:44 Part 1: What Affects Cap Rates and How to Find Them 6:58 Part 2: Cap Rate vs. IRR vs. “Cash Yield” 9:19 Part 3: Cap Rates in Real Estate Models 11:17 Part 4: Cap Rates in REIT Models 12:12 Part 5: Cap Rates Variations, Controversies, and Trickery 15:16 Recap and Summary
It can be useful to benchmark one property against others in the area or the overall average, or to see how Cap Rates for that property or similar ones have changed historically. But this approach is much more common if you use precedent real estate transactions to value a property, as you'll have to back into the Cap Rate based on the market value and NOI there.
@@Walina-gv9ph You buy a house for $500 per square foot. Other homes nearby cost $300 per square foot. You got a bad deal. It's the same with Cap Rates. If you buy at 8%, but other similar properties nearby have sold for 10%, you got a bad deal.
![IRR vs. NPV - Which To Use in Real Estate [& Why]](/img/n.gif)
Files & Resources:
breakingintowallstreet.com/kb/real-estate-modeling/cap-rate/
Table of Contents:
0:00 Introduction
0:37 The Short Version
4:44 Part 1: What Affects Cap Rates and How to Find Them
6:58 Part 2: Cap Rate vs. IRR vs. “Cash Yield”
9:19 Part 3: Cap Rates in Real Estate Models
11:17 Part 4: Cap Rates in REIT Models
12:12 Part 5: Cap Rates Variations, Controversies, and Trickery
15:16 Recap and Summary
If you have the market value what is the purpose of calculating a cap rate?
It can be useful to benchmark one property against others in the area or the overall average, or to see how Cap Rates for that property or similar ones have changed historically. But this approach is much more common if you use precedent real estate transactions to value a property, as you'll have to back into the Cap Rate based on the market value and NOI there.
@@financialmodeling Can you dumb that down? It makes no sense to me.
@@Walina-gv9ph You buy a house for $500 per square foot. Other homes nearby cost $300 per square foot. You got a bad deal. It's the same with Cap Rates. If you buy at 8%, but other similar properties nearby have sold for 10%, you got a bad deal.