Capitalization Rate “Cap Rate”
A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor’s potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property. If you want to get technical, it is basically the discount rate of a perpetuity. Capitalization Rate = Yearly Income/Total Value. Capitalization rate is a good jumping-off point to quickly compare many investment opportunities, but it should not be the sole factor in any real estate investment decision. There are a multitude of other factors that need to be looked at such as the growth or decline of the potential income, the increase in value of the property, and any alternative investments available.
For example, if Amanda buys a property that will generate $125,000 per year and she pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%.
But it gets a little more complicated. What if the property’s value rises to $2 million two years later? Now the cap rate is a less favorable 125,000/2 million = 6.25%. This is because Amanda could potentially sell the property for $2 million and use that money for another investment.
Just bought a house with Glinda. She was great. Some tough situations came up, and she got us through everything. Helped us a find a place exactly like we wanted in the area we wanted too. Highly recommended
I’ve never felt more taken care of in the process of selling my house. Thanks Michelle. You are a rose among real estate thorns! I can’t express my gratitude with words to describe how you’ve helped me with closing a chapter in my life with the sale of my late fathers house. Thank you.
Great experience! Meg Eldridge made us feel like her only client, and I know we weren’t! She had our best interests at heart, and I feel like she was responsible for getting us the best deal possible. She even called to check on us after everything was done and make sure we were still happy (and we are!). Thanks Meg!
Our agent (Whitney Stringer) was great! She was easy to work with and only showed us homes that we were interested in seeing. She even rearranged her weekend schedule to meet us when we came in from out of town to look at homes on short notice. She was professional, courteous, and a pleasure to work with. Because of here we would gladly work with Amanda Howard again in the future.
We weren’t looking to buy a house, but I’m glad we came to Amanda Howard when we did. Whitney Stringer was a perfect fit for us first time home buyers! She listened to our concerns, answered our questions, and was patient and very professional. We looked at the house on 6/16, put in an offer on 6/17, and closed on 7/27. Everything went smoothly (and quickly). If we ever have to sell or buy again, we’d definitely go through AHRE!
Y’all were very helpful in our search for a home. Natalie made the process easy and was very communicative.
Amanda and team, Thank you for assisting our buyers find their dream home! They still talk about their awesome experience!
We worked with Natalie, a buyer specialist. She was professional, friendly, and knowledgeable. She was laid back while showing us homes (patient with our 4 year old sons!), and answered all questions. She was easy to work with and met all our needs. She assisted in making the buying process as easy as possible. Everything went smoothly from initially contacting her to closing on our family home.
Great. Always available when needed. Treated us like family.
Whitney is extremely professional and personable. She is very knowledgeable and was so helpful in the whole process of finding the perfect house. She was great to work with and always made time for us. We would recommend her to anyone in the market to rent or buy!