Stakeholders such as investors, brokers, lenders and appraisers often use these seemingly simple metrics to calculate the market value of an asset. Here are five things you need to know about cap rates and multiples.
Cap rates and the direct capitalization approach to valuation is a useful tool to have in your toolbox as an investor. However, there are many supportive or alternative valuation methods besides just this one.
Real estate investors must be very careful about purchasing an investment property with a low cap rate, at which many retail plazas and multifamily properties are currently trading, with a down payment of 25 per cent or less.
REM (Real Estate Magazine) is Canada’s premier monthly magazine for real estate professionals. REALTORS®, real estate agents, sales representatives, brokers, owners, administrators, and other real estate industry stakeholders read REM every month for news, analysis, and commentary on Canadian real estate.
REM is independently owned and operated, and is not affiliated with any real estate association or board.