Discover the crucial real estate metrics every US investor should know and learn how to calculate them accurately. From cap rate to cash-on-cash return, this guide will equip you with the necessary knowledge to make informed investment decisions.
Investing in real estate can be a lucrative endeavor, but it requires a deep understanding of key metrics to make informed decisions. In this comprehensive guide, we will explore the important real estate metrics every investor in the US should know. From cap rate to cash-on-cash return, we will break down each metric and provide you with the necessary formulas to calculate them accurately. So, let's dive in and unlock the secrets to successful real estate investment!
Understanding Cap Rate: The Measure of Investment Potential
The cap rate, short for capitalization rate, is a crucial metric used to assess the potential return on investment of a property. It measures the relationship between the net operating income (NOI) and the property's market value. Here's how you can calculate it:
Cap Rate = Net Operating Income / Market Value
Evaluating Cash-on-Cash Return: The Measure of Cash Flow
Cash-on-cash return is another essential