Commercial Real Estate Primer for Investors
The term “commercial real estate” (CRE) describes a broad class of real estate assets that are acquired with the intent to earn a profit through rental income, price appreciation, or both. As an asset class, commercial real estate has a strong track record of delivering respectable returns over time, which makes it an attractive investment […]
What is a Cap Rate in Commercial Real Estate?
There is a common saying in real estate investing circles that states “something is only worth what someone is willing to pay for it.” One of the most common ways real estate investors determine what a property is worth is by using a multi-purpose metric known as the Capitalization Rate or “cap rate” for short. […]
Cap Rates in Commercial Real Estate: Formula & Explanation
When considering the purchase of a commercial real estate asset, all investors will use a property’s existing cash flows to create a “proforma” financial projection of future cash flows. The proforma, which includes allocations for income and expenses, serves as the basis for calculating the property’s potential return on investment. A diligent real estate investor […]
Real Estate Returns: Cap Rate vs. Return on Cost
Every real estate investor, whether they focus on commercial or residential property, has their own set of requirements that they use to determine whether or not an investment property is worth purchasing. In commercial real estate investing, there are two widely used methods of measuring returns on a real estate investment: capitalization rate (“cap” rate) […]
Understanding the Capitalization Rate
Commercial real estate properties, even those within the same asset class, come in all shapes and sizes. They have different locations, unit mixes, rental prices, finishes, conditions, and lease expirations all of which can make it difficult for real estate investors to create a true “apples to apples” comparison when evaluating investment options. To solve […]
