Real Estate and Cap Rate
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Real Estate investing and CAP rates
Real Estate Show: What is CAP Rate? The number one question I get asked is, “What CAP rate do you buy?” but this is the wrong question. One piece of data doesn’t substantiate a deal. Don’t get locked into one term. All the pieces of data matter. You need to feel the deal, meaning, do you want to actually do the deal?
The lower the CAP rate the higher I can sell it for. What’s a good CAP rate? It depends. I would have made a fortune in San Diego 20 years ago buying extremely low CAP rate properties. Think about the whole deal, like how you will exit, not just the current CAP rate. There is a number more important than the CAP rate:
1.25
That’s the Debt Coverage Ratio you want. You want the NOI bigger than the debt—you want a minimum 25% more income than debt.
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Grant Cardone is a New York Times bestselling author, the #1 sales trainer in the world, and an internationally renowned speaker on leadership, real estate investing, entrepreneurship, social media, and finance. His 5 privately held companies have annual revenues exceeding $100 million. Forbes named Mr. Cardone #1 of the “25 Marketing Influencers to Watch in 2017”. Grant’s straight-shooting viewpoints on the economy, the middle class, and business have made him a valuable resource for media seeking commentary and insights on real topics that matter. He regularly appears on Fox News, Fox Business, CNBC, and MSNBC, and writes for Forbes, Success Magazine, Business Insider, Entrepreneur.com, and the Huffington Post. He urges his followers and clients to make success their duty, responsibility, and obligation. He currently resides in South Florida with his wife and two daughters.