In order to be called an investment property, the property in question has to show some kind of investment return. But what does that investment return actually mean?
It could mean a few different things to different people. Does the investment show a CAP rate return? Will there be capital appreciation over the long term? Can I use the property personally and still have my expenses covered? What is the future use of the subject property (think redevelopment)? Let’s break these various scenarios down in more detail, but remember, the devil is in the details.
What is a CAP rate?
If you look at an apartment building with four units in it (a four-plex), there is a very quick and easy calculation that you can make to determine a CAP rate. You take…
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