Tell-Tale Sign Of A Real Estate Market Bubble
Real Estate Tip:
The Capitalization or Cap Rate for a property is the ratio between its net operating income (NOI) and the property’s value:
Capitalization Rate = Net Operating Income/Value
You can transpose the formula to solve for property value or net operating income:
Property Value = Net Operating Income/Capitalization Rate
Net Operating Income = Property Value*Capitalization Rate
Real Estate Insight:
If you sign a contract to buy property in a rising real estate market, you've already made money by the time you close