Mathematically, a cap rate is simply:
Net Operating Income, or “NOI” (revenue minus expenses) divided by the Value of the Property.
For example, if you pay $1,000,000 for a building that produces $100,000 of NOI, you’ve paid a 10% cap rate and will expect to earn a 10% unleveraged yield in Year 1, assuming no change in NOI. If that same building produces only $50,000 of NOI, then it was a 5% cap rate.
If you’re more familiar with stock market terminology, then think of a cap rate as an inverse multiple.
Mr. Karsh is a Partner and Co-Founder of Streitwise. His primary responsibilities include sourcing and executing new investments, managing corporate operations, and overseeing investor relations and reporting.
Prior to forming Streitwise, Mr. Karsh was an Acquisitions Analyst for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds, where he was responsible for underwriting, structuring and executing value-add and opportunistic transactions. He holds a Bachelor of Arts degree in Political Science from the University of Pennsylvania. Mr. Karsh is a member of ULI and is also a Real Estate & Construction member of the Jewish Federation of Greater Los Angeles.