💖 4:35 💫

Nope, his hair was grey since he was 16. But his work ethic could have caused premature balding, which it did not so far.

To be honest, you're not using the thumbnail well. Just having a screenshot of your faces will likely do little to get people to click. Check out other popular KZbin channels that are in your genre and see what they are doing with their thumbnails.

First, for reference, from 2019 until recently, we've always assumed that cap rates would expand at 15 bps per year. And that's how we've underwritten all of our deals. That said, most value add multifamily is going to be a minimum 5 year hold. What do you expect to happen with the economy in the next 5 years? Do you expect that there will be a recession? If so, the expectation should be that the Fed will reduce the federal funds rate and that the 10 year treasury rate will both drop and compress. Assuming the 10Y decreases and compresses, it seems reasonable that cap rates will follow suit. Unless you don't believe there is an impending recession, it's difficult to conceive of an economic argument for cap rates to continue to expand.

@@bardowninvestments I think you are in for a rude awakening as cap rates revert to their historical mean

Hey Sam - Unfortunately, not yet legal to ship it to GA. They don't yet have a distributor in that state... Working on it!

I'll have to get up to PA

I agree😂

Thank you!

Thanks! He caught me off-guard with that headline!

That J guy is pretty awesome too, right? ;)

A cap rate isn't only one thing. It can be used measure one of several things, depending on how it's applied. As you suggested, one thing it can do is measure the value of a stream of income. For example, it does that when we apply the formula Value = NOI / Cap Rate. But, as any 7th grader can tell you, that formula can be rearranged, designating a new dependent variable and providing alternative information. For example, we can rearrange the formula to Cap Rate = NOI / Price. In this case, we're dividing the value of an income stream by the cost of that income stream, which provides us the yield of that income stream (a return metric). Long story short, depending on how you apply cap rate (and at it's simplest, how you arrange that formula), it can give us a measure of the value of an income stream, it can give us a location-specific multiplier of comparable value or it can give us a return metric (yield). Let me know if you have any questions.

@@REIStartup NOPE! Why are you trying to solve for cap rate? Cap rate=NOI/Price is useful HOW? All that is telling you is that a sale happened and the property traded at a certain dollar amount, a valuation. There is no "return" there. 10%=$1/$10 Again, show me how that 10% means anything other than the buyer paid $10 for each possible dollar of NOI. If 5% then 5%=$1/$20!

@@Walina-gv9ph - How is Cap Rate = NOI / Price useful? If you were to take a finance course, you'd learn that any time you divide a stream of income by a price you generate a yield. In this case, you're specifically determining the yield on an unlevered stream of income. Why is it important to know the yield on an unlevered stream of income? Because if you have two comparable assets in the same submarket, knowing the relative unlevered yields of each asset will give you an idea of the operational risk associated with each. If two assets are seemingly equivalent, but one has a higher unlevered yield than the other, that one is likely a higher risk asset. In other words, when you have two comparable assets, the one with the higher cap rate is the one that likely has the higher operational risk. As an investor that's a tremendously important piece of information. Let me know if you have any additional questions.

@@REIStartup Where did you get this idea? "If you were to take a finance course, you'd learn that any time you divide a stream of income by a price you generate a yield." Since that is wrong then everything after is incorrect. So, and just think about this, if a cap rate was a yield then why is TWICE the yield (10% cap rate) selling for HALF the price (5% cap rate)? Also what V are you using to try to calculate a cap rate? Hmmmm Asking price? Classic rookie mistake.

@@Walina-gv9ph - Where did I get the idea that if you divide a stream of income by a price you generate a yield? I went to business school. That's where. But, if that's too much work for you, there's this whole world of information at your fingertips if you search for it: A bond yield is coupon / bond face value. A stock yield is dividend / share price. A real estate yield is income / price. Or just go do a search for "formula for yield" and you'll see that you're wrong. Yield at it's most basic is return / price (or value). It's that simple, whether you want to acknowledge it or not. And long story short, if you don't understand yield, you're never going to understand more complex things like cap rates. As for your question: "...if a cap rate was a yield then why is TWICE the yield (10% cap rate) selling for HALF the price (5% cap rate)?" The answer is that that's how fractions work (and you should have learned this in 7th grade). In the yield formula, the price is the denominator. What do you happens when the denominator of a formula gets smaller? The answer is that the value of the formula gets bigger. For a yield formula, the smaller the denominator (price), the higher the value (yield). If the denominator gets cut in half (e.g., HALF the price), the value doubles (e.g., TWICE the yield). I'm sure your next question is, "Why would someone ever sell twice the yield for half the price?" And if you read my previous response, you'd understand that. Yield (cap rate) in real estate is also a measure of risk. When two comparable properties sell at a different price and yield, that's because they have a different amount of operational risk. If one property sells at a 6% cap rate and a comparable property sells at an 8% cap rate, the 8 cap property is going to have a higher operational risk. Okay, I've now explained to you have fractions work; I've explained to you the definition/formula for yield; and I've even touched on risk and how yield and risk are (inversely) correlated. Any other questions I can answer for you?