How to Calculate a commercial CAP Rate.
What is CAP rate ? It is a rate of return that you get yearly on the commercial property. For example: Purchase price$ 1,000,000. Net Operating Income , NOI = 100.000. 100,000/1,000,000 = 10% CAP Rate. The difference on borrowing rate and CAP rate is what you make on your investment at the end of the day. If you borrower at 6%, and your CAP rate is 10%, then you will make 4% net. Loan amount that you can get based on the cap rate : NOI / 1.25 and then divide that by the bor
