Season 3, Episode 6: From the ValuVault – Cap Rate 101

Cap rate in plain English

• What it is. Net Operating Income ÷ Purchase Price = Capitalization Rate (Cap Rate).
• Why it matters. It’s the quickest snapshot of risk vs. return for retail, industrial, office—any income-producing building.
• 2025 benchmarks. • Industrial avg. ≈ 6.8 % • Logistics hubs trending ≈ 10 % • Class-A office higher still (risk premium).

Big-picture takeaways

• Buyers / investors – A lower cap rate signals hotter demand (safer cash flow) but commands a higher up-front price.
• Mortgage pros / appraisers – Always compare the subject’s cap rate to local market norms before finalizing value.
• Everyone – Scrutinize the NOI line by line; inflated rents or understated expenses will fake a “too-good” cap rate.

Quick script for your next deal

• “What’s the most recent market-wide cap-rate survey for this asset class?”
• “Show me last year’s full rent roll and trailing-12 expenses—let’s confirm NOI.”
• “If we underwrite at today’s higher cap rate, how does that change LTV or price?”

🔗 Episode audio: ValuVault – Cap Rate 101
https://rss.com/podcasts/valunation/2089304/

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