11/16/2023 0 Comments Noi cap rate![]() You will understand what a cap rate is in real estate in this post, from its definition to methods of calculation. After all, it can be confused with cash-on-cash returns and the rate of return. Yet many people don't really understand what it means. Is It a Good Time to Sell a House or Should I Wait Until 2024?Ĭapitalization Rate or Cap Rate is a term often thrown around in real estate discussions.Washington State Housing Market: Prices & Forecast 2023.Toronto Housing Market: Prices, Trends, Forecast 2023.Ontario Housing Market: Prices, Trends, Forecast 2023.Is Housing Recession Over: Real Estate Recession 2023.How Rising Interest Rates Affect Real Estate Investors.Tampa Housing Market: Prices, Trends, Forecast 2023.Boise Housing Market: Prices, Trends, Forecast 2023.Cape Coral Housing Market: Prices, Trends, Forecast 2023.Irvine Housing Market: Prices, Trends, Forecast 2023.Fresno Housing Market: Prices, Trends, Forecast 2023.Housing Market Crash: What Happens to Homeowners if it Crashes?.How to Profit From Rising Interest Rates in 2023?.Promissory Notes: Definition, Types, Examples, Templates.List of FDIC-Insured Banks in 2023: Is Your Bank Insured?.Housing Market News 2023: Today’s Market Update.Projected Interest Rates in 5 Years: Will Mortgage Rates Drop?.Will Interest Rates Go Down in 2024: What is the Forecast?.Cleveland Housing Market: Prices, Trends, Forecast 2023.Tucson Housing Market: Prices, Trends, Forecast 2023.I'm a newbie in the car wash realm, but using the cap rate model, I feel like I got exactly what I paid for when I bought the wash I currently own. 02 from many years buying/selling commercial real estate. Car washes often get priced at 10-12% cap rates because the industry is known for hands-on owners who want to get paid a good return for all of the crap that they have to deal with in running a car wash.ĭisclaimer: this is just my. That assumes that the buyers of those properties aren't interested in getting their hands dirty or working onsite, so they'll accept a lower return on their investment. With respect to cap rates, "safer investments" like apartments and office buildings in my area are usually priced at a 4 to 6% cap rate. If wash #1 needs a ton of work, and wash #2 has been newly renovated, then I'd base my decision on how much money I have to spend on the front end of the project, and how much work I'm willing to do. Wash #2 - owner is asking $1,200,000 for his wash with $100,000 NOI - or a 8.3% cap rateĪssuming the two locations are roughly equal in location quality, age of components, etc, then I'd take the higher 12.5% return on my money. Wash #1 - owner is asking $800,000 for his wash with $100,000 NOI - or a 12.5% cap rate If I'm looking at two different car washes and trying to find the one with the best profit potential, I'll ask the owners for their actual income and expense numbers (if they don't have it, I keep walking) The gross income multiplier doesn't take expenses into account, so there's no way to accurately gauge the true profit potential of the car wash. Cap rate (net operating Income divided by asking price) is the best way to compare apples to apples when you're looking at a cash flow stream for any investment: rent houses, car washes, apartments, office building.
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