If you don’t evaluate your investment return, you could find yourself with a property that doesn’t do anything for you. One of the easiest ways to evaluate an investment property is to calculate the cap rate.
The originally intended cap rate formula is calculated in the following way: Annual Net Operating Income / (Cap Rate / 100) = Proposed Value of Property
Your net operating income is your total revenue for the property, less your total expenses. It’s also commonly referred to “Cash Flow”, or the (hopeful) cash you have in hand at the end of the year.
Your net operating income is your total revenue for the property, less your total expenses. It’s also commonly referred to “Cash Flow”, or the (hopeful) cash you have in hand at the end of the year.
The type of lease you have with tenants will impact your cap rate. The lease will drive your overall expenses for the property, which is a factor of NOI.