How to Analyze Real Estate Rental Properties: Capitalization Rate Explained

When you're analyzing a real estate deal for a rental property, one of the most common metrics you'll hear about is cap rate or capitalization rate.

Whether you're an investor, a realtor, an appraiser, or a broker, learning about cap rates is critically important because it's a common benchmark that someone else can use against you if you don't know it.

Rental Property Calculator: https://sageregroup.com/calculator
Gross Rent Multiplier Tutorial: https://www.youtube.com/watch?v=qgwx6-E86wY

0:00 - Intro
0:19 - Why is Cap Rate important?
0:41 - Overview
1:00 - What is Cap Rate?
1:52 - Calculating NOI (Net Operating Income)
4:53 - Formula for Finding Cap Rate
6:39 - Finding the Property Value Using Cap Rate
7:04 - When to Calculate the Cap Rate
8:03 - What is a Good Cap Rate?
10:33 - How Cap Rate Affects the Property Value
12:25 - Rental Property Calculator
12:48 - How Increasing Rents Affects Value
15:42 - Limitations of Using Cap Rate
17:08 - Final Takeaways

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Juan is a Licensed California Real Estate Broker that has acquired his Certified Commercial Investment Member (CCIM) designation and a Real Estate Investor who is dedicated to helping people build wealth and financial independence through real estate investing.

Juan specializes in selling multifamily apartment units as well as residential properties. He prides himself in locating value-added properties that maximize the client’s investment yields. Juan is a detail-oriented entrepreneur.

Today he handles everything from finding, funding, designing, managing, and selling investment properties. His diverse experience in commercial and multifamily real estate allows him to develop and navigate a wide range of projects.

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