How To Calculate Cap Rates & Future Valuations

Updated: Aug 3

Curious to know what cap rate you are getting when looking at a multifamily investment opportunity?

When you're just starting out, it's important to learn the industry lingo and get familiar with common terms that are used by real estate professionals.

Cap Rates are one of the most popular metrics used and referenced by professionals in the industry.

Check out the video below that gives a brief overview of cap rates and why they are important when looking at and evaluating investment opportunities.

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But What Are Cap Rates?

"The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. This measure is computed based on the net income which the property is expected to generate and is calculated by dividing net operating income by property asset value and is expressed as a percentage. It is used to estimate the investor's potential return on their investment in the real estate market."

Understanding how cap rates work and how to gauge the viability of an investment opportunity is essential to being a successful investor in the commercial real estate space. Check out some of the features of this free tool below:

Tool Features:

  • This tool calculates your going in cap rate so you can see if you're getting fair market value.

  • See how much value you can create from an investment property over the life of the hold that you expect.

  • Understand if a given investment property can support a business plan and whether you should invest in it or not.

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