Passive Investor Blog

What is the Historical Annual Rate-of-Return on Real-Estate Investments?

What is the Historical Annual Rate-of-Return on Real-Estate Investments?

9.4% – 10.5% …maybe.
Anyone can cherry-pick and alter numbers of expected returns based on website choice, experience in a diversified market, and what type of real estate invested in. The market as a whole seems to generate an average number around 9% – 11%. Realize that average number means that there are some that make much more and that some lose everything!

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What is a CAP Rate?

What is a CAP Rate?

What is a CAP rate and how do you use it in commercial real estate?

Capitalization Rate (CAP Rate) is one of many terms used to determine the value of a commercial property that is leased for profit; it is another way to determine the rate of return.  Cap rates are strongly driven by the income the property is expected to generate but also influenced by the larger area and sub-market where the property is located.

CAP rate = NET Operating Income (NOI) / Current Market Value (expressed as a percentage)

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