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.
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.
“It was a great match for us. Jessica helped from the first second to the last. She listened and responded to our needs, wants and wishes. We couldn’t have been more grateful :)! Joel & Dhurata Dobbins”
Amanda Howard’s company is professional and hardworking. The integrity and work ethic is why they are so successful.
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!
Amanda and team, Thank you for assisting our buyers find their dream home! They still talk about their awesome experience!
I moved down here in April 2015 from New York and I did not know any one besides my brother. This company took me in and I consider them my second family. I have had numerous jobs in the past and this is by far the best company I have ever worked for. They also helped me purchase my first house for a great price and great conditions. Nothing but amazing this to say about this company!
We were very pleased with the professionalism, friendliness, and great communication with Natalie. She was a pleasure to work with. The home buying process was made so easy and everything went smoothly.
Amanda Howard real Estate was awesome, it was a quick process for me cause I already knew what I want. For areas that I needed help with, they had the solution. Thank you!!
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.
100% LOVE working for Amanda Howard Real Estate! The honesty and integrity of our team makes working here a great experience personally and professional!!!