UNDERSTANDING CAPITALIZATION RATES AND METRIC
S IN REAL ESTATE
Capitalization rates are used to determine the value of income-producing properties.
The formula for calculating cap rate is net operating income divided by property value.
Cap rates vary by location, property type, and market conditions.
Metrics like gross rent multiplier and cash-on-cash return can also be used to evaluate investment properties.
Gross rent multiplier is calculated by dividing property price by gross rental income.
Cash-on-cash return measures the annual return on investment based on the amount of cash invested.
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Understanding these metrics can help investors make informed decisions about real estate investments.
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