![]() Not be considered a recommendation or personalized advisory advice. The information provided is for informational purposes only. The rate is calculated in a simple fashion as follows: $100,000 (net operating income)/$1,000,000 (cost of property) = 0.10 = 10%Ĭash-on-Cash Return: This measures the return on cash invested: A cash flow of $15,000.00 per year from an investment of $100,000.00 would give a 15% cash-on-cash return: $15,000.00/$100,000.00 X’s 100 = 15%įor General Purpose Only Legal Disclaimer Non-residential real property (not including farm buildings): 39 yearsĬapitalization Rate or Cap Rate: This is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value.
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