Cap rates have hit new lows by most measures. This means buyers are willing to accept less current income relative to the purchase price. Should we be worried? That depends. Before we analyze whether there’s cause for concern, let’s first define a cap rate and the current drivers of the newly low rates. A cap rate is net operating income (NOI) divided by adjusted purchase price. For example, a property with $100,000 in NOI that sells for $1 million equates to a cap rate of 10 ...
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