What is a Cap Rate? Why Cap Rates DON'T matter!!! Multifamily 101

What is a Cap Rate? How do they affect your decisions when investing in real estate? Why does Christian Osgood think cap rates don't matter? We will go into all of it in this weeks real estate 101!

So what is a Cap Rate? Well, there is a Cap rate for purchase which is the annual net operating income divided by the sales price. If you buy and hold this doesn't really matter at all as long as you never need to sell it. Then there is the market Cap rate. Market cap is the average Cap Rate that similar properties have traded for in the same area. This one matters a bit if you plan to refinance and have an upcoming balloon. Underwrite your deals carefully and conservatively and makes sure you know how to own it and never loose it. When you introduce seller financing or creative finance in general you often have a balloon payment so be prepared and use a conservative cap rate for your real estate analysis.

To learn more about creative finance, Cap rates, and seller financed negotiation check out https://themultifamilystrategy.com

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