02/26/2026
📈 Know Your Cap Rate (Before You Buy!)
If you’re buying real estate for the "vibes" and not the numbers, you’re just buying a hobby. If you want an investment, you need to know your Cap Rate.
🔍 The Breakdown
The Capitalization Rate is the quickest way to see a property’s potential ROI without factoring in debt. It’s the "pure" profitability of the asset.
🧮 How to calculate it:
Step 1: Calculate your Net Operating Income (NOI) (Gross income minus operating expenses).
Step 2: Divide that by the Purchase Price.
Step 3: Multiply by 100 to get your percentage.
💡 The Rule of Thumb:
High Cap Rate: Higher potential return, but usually comes with higher risk or a "tougher" location.
Low Cap Rate: Lower immediate return, but typically found in safer, high-demand "A-Class" areas.
The Bottom Line: A "good" cap rate depends on your goals and the local market. Don't chase a high number into a bad neighborhood!