Real Estate Financial Modeling - Terms & Definitions

This video goes discusses some of the key terms and definitions in regards to real estate financial modeling.
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[@cdevine31]

FYI Capital expenditures are usually not included in noi, unless they are smaller, routine repairs or maintenance.

[@Walina1001]

Why would an investor ever want to try to calculate a cap rate?

[@averyrustad7605]

If you are buying a turnkey property then you would generally like to know the cap rate

[@Walina1001]

@@averyrustad7605 Why?

[@Walina1001]

@@averyrustad7605 If you bought a turnkey property and you think there is a "crap rate" on it then you have already been taken to the cleaners. LOL If you file a lawsuit against them when your money goes south keep me in mind because I will be happy to testify for you that your "turkey" provider scammed you.

[@Rebioable]

@@Walina1001 Why is that? You would know the NOI (for simplicity say a single unit in a managed building so you know the rent income etc) and the market value, so why wouldn’t it have a cap rate? Interested in your view

[@Walina1001]

@@Rebioable Cap rates measure value. They come from an income approach to value called direct capitalization. Scammers want you to think they measure profitability but they do not. A property bought at a 5% cap rate can be twice as profitable as a property bought at a 10% cap rate. Scammers don't want you to know that.
Since you have the VALUE then what would be the point of calculating a cap rate? The formula is V=i/r I have a property that I want to buy. The NOI is $100,000. What do I pay for it? I need cap rate comps. So I find out from sales of similar properties (closed sales that have been analyzed by third party professionals) that their NOI's sold for a 10% cap rate. So V=i/r $1,000,000=$100,000/10% THAT is how cap rates work. If you knew the value was $1,000,000 to start with what would be the purpose of wasting your time getting the cap rate comps and figgering the NOI when you already had the answer? Smart investors don't waste time or get scammed!
I hope that answered your question.