How to Calculate Cap Rates for Rental Real Estate. What is the difference between a stabilized ARV cap rate and a going-in cap rate?
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Figuring out how to calculate the estimated cap rate.
Two different kinds of cap rates:
1) Stabilized Cap Rate - After repairs and value adds and income is conceivably increased
2) Going-In Cap Rate - Cap rate when the property is in as-is condition
Start with the net operating income, divide that number by the purchase price. Next, take that number and move the decimal point two spaces to the right. This gives you the cap rate percentage!
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