857-800-1237 jacky@jackyfils.com

If you’re new to real estate investing, you may have come across the term “cap rate” and wondered what it means. Put simply, the capitalization rate, or cap rate, is a way to measure the potential return on investment for a property.

Cap rates are calculated by dividing a property’s net operating income (NOI) by its market value. NOI is the income generated by a property, minus the expenses associated with running it, such as property taxes, maintenance costs, and insurance.

For example, let’s say you’re considering purchasing a small apartment building with an asking price of $1 million. The total annual rent collected from tenants is $100,000, and the annual expenses associated with the property, including property taxes and maintenance costs, are $20,000. The property’s NOI would be $80,000 ($100,000 – $20,000).

To calculate the cap rate for this property, you would divide the NOI ($80,000) by the property’s market value ($1 million) and multiply the result by 100 to get a percentage. In this case, the cap rate would be 8% ($80,000 ÷ $1 million x 100).

Cap rates are important for real estate investors because they provide a quick way to assess the potential profitability of a property. A higher cap rate generally indicates a higher potential return on investment, but it’s important to consider other factors, such as the location, condition, and market trends, before making an investment decision.

In summary, cap rates are a useful tool for real estate investors to quickly evaluate the potential return on investment for a property. By understanding the basic formula for calculating cap rates and considering other factors that may impact a property’s profitability, you can make informed investment decisions.

If you’re interested in learning more about real estate investing, we encourage you to reach out,  schedule a call and discover how we can help you achieve your financial goals through real estate investing.



About Jacky Fils:

Who am I? I am a Real Estate Investor & Entrepreneur who happens to be a physician. I have chosen this path after understanding very well the in’s & out’s of above-average return on investment (ROI), backed by a solid asset, Real Estate. I have been actively investing in real estate in the western Massachusetts area for a number of years. My mission is to provide quality housing for quality tenants, while at the same time providing an above-average return on investment (R.O.I) for our investor partners. It is truly a win-win-win way of investing!

Jacky offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Jacky.

For more information about Jacky and his investment program,
please call 857-800-1237 or visit https://jackyfils.com/