businessJan 9, 202523:10pending

Cap Rate | Understanding What Makes a Good Deal and Why

Franchising & Real Estate | Second Life Method Podcast FRE | 2LM

About this episode

In this episode, we’re going to understand capitalization rate, and what makes a good deal and why. A commercial property, like an office building or apartment complex, is valued according to how much income the property makes, minus its expenses. Residential properties, such as singles homes, are valued differently, basing things on how much people are willing to pay and how much financing the bank will give to the lendee. Investors, brokers, and banks use the term cap rate in every day investing to refer to the relationship between how much properties make each year in income relative to their overall sales price of kind of what the properties are going for.

The definition of cap rate 2:15
An example of cap rate 3:45
Low cap rate 8:15
High cap rate scenario 10:00
Average cap rate 12:05
Hot spots in the market 14:15

“You’ll need to calculate the cap rate yourself, okay? On each property that you examine, compare it to the market basis, then pass it through the filter of your own experience, and the filter of the deals you’ve done, and use your instincts. If it meets all those requirements, then great. If not, then keep looking. Do your due diligence on the property and find out what the exact cap rate is on the property you’re interested in, and then make the decision whether or not to invest.” 18:35

Get every episode summarized

Each time Franchising & Real Estate | Second Life Method Podcast FRE | 2LM publishes, we email you a written briefing from the transcript — the topics, who appeared, and any specific claims, with the ad reads skipped.

Email me new episodes

Free for 3 shows. No card needed.

No transcript yet

This episode has not been transcribed. Request it and it moves to the front of the queue.