newbie

General Real Estate Investing
1

I am new to investing in commercial properties. When I see “cap rate”, exactly what does this refer to? Am I better with a lower or higher #?

The property I was looking at, had a cap rate of 8.75%
The rents on the property could be higher. If they were higher, would this increase the cap rate?
I tried to do a search on the site, but it really wasn’t explained in much detail.

2

Your capitalization rate = the NOI (Net Operating Income) / the value of the property. It does not take into account debt service. See the below link for a good article.

http://www.invest-2win.com/caprate.html