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What Is A Cap Rate?

In this video, Millionacres explains how to calculate a cap rate. A cap rate is most often used for commercial property investments but it can be used with residential properties as well.To calculate the cap rate for an investment property, take the property’s net operating income and divide it by the property’s market value. If you know the market average cap rates, calculating the cap rate of properties you own can help you determine if they're over-performing or underperforming the industry averages.