Welcome to the Real Estate Strategies podcast. I'm Ken McRoy and I'm here to give you creative ideas

on how you can get started or continue your journey in real estate. Enjoy the episode.

Hey everybody. It's Ken here and appreciate you guys sending all your questions in on

Instagram and Facebook and TikTok and all the different in on instagram and facebook and tick talk and all the

different social media is and linked in so uh we take a look at those questions every every single

week and and kind of decide which ones would be great for podcasts which ones would be great for

videos and so i picked four questions today that I thought were really,

really good that all of you might really, really enjoy. And so the first question is why are cap rates

given so much attention if I practice a buy and hold strategy so I'm not in the market to sell?

And assuming you are able to cover your debt and cash flow, which makes sense, why do they even

matter or do they not even matter? So this is a very good question. So what I'm going to do is I'm

just talk you a little bit about how we approach cap rates. And so first of all, I think cap rates,

for a lot of you people who don't know know what they are they're called capitalization rates

and essentially it's just the price that you pay divided by the n oi or the net operating income

which of course is income minus expenses and so what you're trying to do is you're trying to buy

properties at a higher cap rate or a higher capitalization rate, which means that your

price that you're paying is lower than something that has a lower cap rate. So you're always

looking at, you know, kind of where cap rates are. For those of you don't completely understand

them, I suggest you take a look and try to understand them.

So cap rates for us are just more or less anything, less than a barometer of what's happening

in the marketplace. So let me give you an example. So on the outside of a particular town,

we'll just pick Dallas, for example.

...