Real Estate Investment-3
The only reason you care about cap rate is that you’re really trying for an easy proxy for what kind of cash flow the investment is going to generate. In investing cash is king – ignore this calculation at your peril.
Estimating cash flow entails plotting out the major expected cash outflows (taxes, principal, interest, expenses, vacancies, fees, repairs) and comparing it with the income that the property produces. You can do this either via a spreadsheet or using a real estate evaluation software package.
