What is a Capitalization Rate? - Real Estate Basics

If the government has an NOI it’s negative.

Not so pro tip - If you see a cap rate as part of the marketing material for the property, it's probably wrong. I can't count how many times agents either knowingly or unknowingly misrepresent the number. Most of the time it's not taking all/any expenses into account.

Thank You for all of your videos that you did. I am enjoying all of them

Wow! Perfect lesson! If your master course is a lot like this, its definitely worth the money! I'll be checking it out.

whats a good cap rate 7% and below?

Clear Ken. Thanks for being there

ken your the boss, thanks man, your vids are gold

Go deeper at a higher level. CAP rate videos are for 101 level

It's either I'm missing something or misunderstanding. You want to buy low and sell high right? If you are buying something for 3 cap rate then bring it up to 6 cap rate and sell it.

Why do you want to sell at a low cap rate?

This is long overdue but Thanks for everything Ken! Been following you for the past month or so and you’ve helped me to gain the confidence to start my journey as an investor. (I’m in the process of buying my first rental property!) Thanks again for everything!

I understand that as far as property purchased for the purpose of rental income. How is property that is paid for and later converted to rental property calculated as far as cap rate is concerned?

You inspired me actually to start my own channel.

this is a powerful lesson..thanks Ken

Ken, thank you. I will meet you one day. I've learned alot from you and Robert.

I dont get it ...so what you just dream up the value on paper ????

Awesome thank you!

Usually one time per sentence.

Fantastic Job Ken!
Great!
Thank You!

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Is it that NOI gets measured yearly and then the value portion of the equation is measured based on the price you agree to? So NOI, when you pay the house off goes up the (for example) 10k per yr you would be spending on the P & I. Am I understanding that correctly?

Also is there anything you would not include in the expense portion of the equation or is it literally every penny?

Ken, I need some serious advice please. I’m looking into being a first time home buyer in California but currently we’ve all seen the housing market skyrocket in the past few years. I’m currently looking to purchase a home in central California (Sacramento-San Joaquin region) but extremely hesitant at these outrageous prices. For example, majority of 3 bedroom/2 bath home is currently going anywhere from $400-800k depending on location/neighborhood…….these same homes used to be $200-300k a few years ago……I definitely don’t want to buy this at the top when everything is about to crash all over again…..thank you for your time and advice/suggestions.

What white board is that?

Simply put smart people invest and dumb people spend and save!!!

Ken - the last piece of advice you give here, “buy at a high CAP rate and sell at a low one” is great, but you left out one important question: HOW DO YOU DO THAT? Is it totally determined by the market (I.e. out of investors control)? If so, what does one do in today’s environment when (where I invest) we are setting CAP rates in the 4-5% range?

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Thanks for this excellent lesson!!

This was a good video, explanation. It would be a bit better if you would have spoke more about the exit cap rate and how, why this gets lower...

Hello ken McElroy, thanks for the great video it helped a lot, can you please elaborate on why you want the cap rate to be lower when you exit or sell?

So is a 10 % cap rate a good benchmark to begin

Direct capitalization is used to value properties. Since you have the value why are you wasting time trying to calculate a cap rate? That is backwards.

Hi Ken, Does NOI already deducts the cost of interest payment?

Why do you say link below but it’s up🙄

This was GREAT! Thank you!

If NOI increases cap rate also increases how can one sell at a lower cap rate!?

Well said, thanks Mike.

Great delivery!

Why when selling you want the cap rate to be lower?
Wouldn’t it look good for the buyer that the cap rate is high?

Wouldn’t high cap rate when you buy be expensive, and low when you sell be cheaper? It Sounds like a losing deal, you would be buying high and selling low right?

Awesome, thank you Ken....

This still confuses me if I buy a house for 70k and make $300 there no way the cap is 233

Thanks for the info!

What’s the reason why you want to buy high cap and sell low cap?

Great and informative video. I subscribed and am interested in watching other videos. JP

Love you bro

Nice content

You are wrong, higher cap rate means lower price