Decoding Cap Rates: Multifamily Real Estate Investment Secrets

Jake and Gino Real Estate Entrepreneurs

Jake & Gino

Buyingapartmentbuildings, Investingsmart, Multifamilyrealestateinvesting, Business, Smartinvesting, Jakeandgino, Apartmentinvesting, Investing, Commercialrealestateinvesting, Makingmoney, Buyingrealestate, Realestateinvestment, Wheelbarrowprofits, Realestateinvesting, Cashflow

5 • 831 Ratings

🗓️ 17 July 2023

⏱️ 11 minutes

🔗️ Recording | iTunes | RSS

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Summary

Get ready to dive deep into the world of multifamily real estate investing with Jake and Gino on this episode of How To with Jake and Gino. Today, they're unmasking the mystery behind capitalization rates, or cap rates, a crucial concept that often confuses would-be investors. Learn why understanding cap rates can make or break your investment, how cap rates interact with market prices, and how they can reflect market risk levels. Additionally, Jake and Gino explore real-world comparisons between different markets and cap rate trends, the interplay of cap rates with Net Operating Income (NOI), and the implications of cap rates on your overall investment strategy. In this engaging discussion, they also tackle key concepts such as cash on cash return, debt service coverage ratio, and rent growth, elucidating how these factors contribute to a successful multifamily real estate investment strategy. Sign up for their upcoming webinar at jakeandgino.com/webinar to learn more about their unique "Buy Right, Manage Right, and Finance Right" strategy, and how they recently closed their latest deal. Discover how to leverage cap rates and other crucial metrics to boost your real estate investing career! We're here to help create multifamily entrepreneurs... Here's how: Brand New? Start Here: https://jakeandgino.mykajabi.com/free-wheelbarrowprofits Want To Get Into Multifamily Real Estate Or Scale Your Current Portfolio Faster? Apply to join our PREMIER MULTIFAMILY INVESTING COMMUNITY & MENTORSHIP PROGRAM. (*Note: Our community is not for beginner investors) 👉https://jakeandgino.com/apply About Jake & Gino Jake & Gino are multifamily investors, operators, and mentors who have created a vertically integrated real estate company. They control over $250M in assets under management. They have created the Jake & Gino Premier Multifamily Community to teach others a simple three-step framework for investing in multifamily real estate. Connect with Jake & Gino on the social media platform you are most active on: https://jakeandgino.com/link-tree/

Transcript

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0:00.0	Hello, everybody, Jake and Gino here, and today we are discussing cap rates.
0:04.1	This is going to be a snoozer.
0:06.3	And specifically, what is a cap rate?
0:08.8	I'm kidding.
0:09.8	This is actually something that's very important if you want to invest in in multifamily housing.
0:14.7	And, gang, this is one of the things holding would-be investors back, excuse me, early on in their career, the lingo, the multifamily investing
0:23.7	cap rates and waterfalls and IR projections. This is this is the stuff that everybody's talking
0:29.3	about. And if you're new to the space, you might be scratching your head saying, this sounds foreign
0:33.8	to me. By intention, maybe, who knows? So what do we do we do here well we bring in the g daddy to
0:40.1	break it down for us so gina how's it going today doing good jake and i thought you were going to give
0:43.9	the definition because every time i say something about cap rates we get all the haters coming out
0:47.7	and to me it's it's very interesting haters i don't care about cap rates
0:51.5	who before i give i let jake give the definition of the cap rate and even the formula.
0:57.8	I want to mention two things about cap rates.
1:00.5	There's an inverse relationship between cap rates and prices.
1:04.1	When a cap rate drops from, let's say, a 10 cap to a 9 cap, the price goes up. So as cap rates drop, it's really important.
1:13.6	Price goes up. It gets very expensive. It seems counterintuitive. And I would say to the cap rate.
1:18.6	Say that again, you know, because you went over that kind of fast. I think this is something that
1:21.7	early on people don't realize. And it's very important. Hit that again. Sure. So cap rates,
1:26.4	when they tend to drop, prices rise. Hit that again. So cap rates, when they tend to drop,
1:29.0	prices rise and vice versa. When cap rates are rising, prices drop. And to me, when I look at a cap rate,
1:36.8	and I'm going to give you a number, for instance, a 10 cap. And I'm looking at that versus a 5 cap.
	...

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