We all know what cap rate is.
NOI, cap rate and price - all three variables fit together.
You need to understand how the cap rate works. A property that has a higher cap rate is less valuable than a property with a lower cap rate!
Everybody else thinks, "Oh, a 10-cap is better than a four-cap." No! Just do the math. Remember, a one dollar increase on a four-cap is a 25% while a one dollar increase on a 10-cap, I think it's $12.67. Well, $16.67. And on six-cap, it's like 12 bucks.
That is why we go for the more higher quality properties. That's why the insurance companies, the pension funds, the big investors who build - they go with a Class A property, because of how they can force the appreciation.
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