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.
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!
AHRE team is the best! Friendly, helpful, and great to do business with!!
This wonderful company was extremely helpful with the purchase of our new home! We worked with Whitney, she is very professional and personable and now good friend. She always made time for us when we had questions or wanted to look at more houses. We would highly recommend her!
I love Amanda and her agents! I have a great house that I couldn’t have imagined having! Thank you AHRE!
Blessed to be part of this team! Thankful for the opportunity AHRE has given me. I love my job and the people that I work with.
Amanda Howard’s company is professional and hardworking. The integrity and work ethic is why they are so successful.
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.
“Jessica was a great match for us! She helped from the first second to the last. She listened and responded to our needs, wants and wishes. From the initial meeting to the staging process, and pictures and finally posting the house and contacting potential buyers she kept us posted and updated. We couldn’t have been more grateful :)! Joel & Dhurata Dobbins”
I worked with AHRE. We would HIGHLY recommend anyone who is looking to buy a home to go through AHRE. The best real estate company anyone could ever ask for. They will go above and beyond call of duty. Thank you AHRE!!!!!!!
Y’all were very helpful in our search for a home. Natalie made the process easy and was very communicative.