INSTRUCTIONS:

Complete this assignment Using Get REFMs Truly Understanding Cap Rates

YouTube Link: https://www.youtube.com/watch?v=xZWLTBh9RQ0&t=30s)

Type your answers in red bold font

1. What is a Cap Rate?

2. What is the term Cap Rate short for?

3. A cap rate is simply a percentage that is derived through

4. What a cap rate reflects in a real estate estate context is the desirability for a particular type of [*___*] [*___*]

5. When we talk about cap rates, we are talking about how does the real estate market view a stream of [*___*] [*___*] from an [*___*]

6. How are those cash flows [*___*] relative to other investment opportunities in real estate and outside of real estate.

7. We calculate the cap rate using [*___*][*___*][*___*][*___*][*___*][*___*][*___*].

8. Stabilized means [*___*], or growing [*___*][*___*][*___*][*___*].

9. We use an existing asset that has [*___*]

10. We divide the NOI by the [*___*][*___*], or the [*___*] of the [*___*].

11. When we say an 8 cap, the property has a cap rate of [*___*], which means that if we were to do the math, the income is [*___*]% of the [*___*][*___*][*___*].

12. The cap rate is also equivalent to a [*___*].

13. The cap rate states this is what we are [*___*], and this is what we expect to [*___*].

14. A 5% cap rate is equivalent to a [*___*] multiple. This is derived by dividing [*___*] by [*___*].

15. An 8% cap rate is equivalent to a [*___*] multiple.

16. What we are saying is, if we are buying an asset at an 8 cap, we are paying [*___*] the next years [*___*]. If we multiply this number by 12.5, this will give us the [*___*][*___*].

17. When people talk about cap rates are high, they mean a [*___*] percentage. Or if they say they are low, they mean a [*___*] percentage.

18. The higher the cap rate, the [*___*] the multiple. The lower the cap rate, the [*___*] the multiple.

19. If you buy a building at a 4 cap, you are paying [*___*] times that estimated next years adjusted NOI.

20. Cap Rate Compression: Compressing a cap rate means it is becoming [*___*], but when the cap rate becomes [*___*] the multiple becomes [*___*]. The cash flow stream is considered more valuable at a [*___*] cap rate.

21. Based on this analysis, you should buy a property at a [*___*] (lower or higher) cap rate.

22. If someone says they bought a property at a 7 cap, then then from the buyers perspective, this means they first years NOI/Purchase Price will yield them a [*___*]% yield.

23. When you hear conflicting reports based on what the property was purchased or sold for (e.g., bought at a 6 cap by the seller, but bought by the current buyer at a 7 cap), then you need to review the [*___*][*___*][*___*]. This is where the analytical aspect of real estate comes into play.