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Building Contractor

How to Calculate a Capitalization Rate Or Cap Rate

The Capitalization Rate or Cap Rate is a measure of income producing property’s unleveraged interest rate return. The ratio is derived by taking the annual net operating income at the property divided by the property’s value.
Cap Rate = Net Operating Income/Value
EXAMPLE 1 Suppose a property is offered for sale at $3,200,000. The sales broker lists a pro forma NOI of $200,000. The implied cap rate would be the following:
$200,000/$3,200,000 = 0.0625% x 100 = 6.25%
This means that if you purchased the property for $3,200,000 with no debt, and achieved a $200,000 NOI in the first year, you would receive a 6.25% return on your invested equity. The cap rate is a common metric used by brokers, borrowers, lenders and appraisers in real estate. It is easy to understand and a quick metric as to the implied “worth” or “risk” of a property.
One way to understand …

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Commercial Real Estate

How Lenders Calculate Apartment Loans

The real estate business has exhibited troubles and uncertainty in the course of the past decade. SBA ARC Loan Plan – The SBA ARC (America’s Recovery Capital) Loan System is relatively a new SBA loan plan and was developed as a outcome of the current economic recessionary markets. The table above emphasizes the heightened commercial real estate exposure compared to total capital in banks with $100 million to $ten billion in assets. A significant misconception about the SBA loan applications is that the US Federal Government is the actual lender and supplies direct loans to organization owners.

The fewer loans that are offered for businesses, specifically tiny companies, will hamper employment development, which could contribute to higher vacancy prices and additional troubles in the commercial real estate market place. The ARC loans will be produced by specific SBA lenders as extended as the program allocated funding remains available or till …