(First off, whoever came up with the forum deserves a lifetime supply of oven-fresh cookies. I personally find it helpful in learning.)
The best explanation I’ve come up with so far (I’ll be updating this as I gain more clarity)
“When you want to grow your money, you can do that by buying an asset (which could be a business, piece of real estate, etc). Before you buy an asset, it helps to have an idea of the VALUE of the asset.
“One of the ways to find out the value of an asset is by comparing how much income it actually brings in every year with how much the asset cost you to buy. This is the capitalization rate, shown in a formula:
Annual earnings / Asset cost
Capitalization rate is a number that quickly tells you how much per income dollar your asset is costing you. Thus, a low cap rate means you are getting more value from the asset”
Please what else am I missing?
In: Economics
In gonna bookmark the shit out of this… working on property valuation for a finance group and still when I need this I can only figure the Matrix loading screen in front of my eyes 🙂
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