Skip to content

Cap Rate Formula


Hey, this is Terry Hale give you a little wisdom for wealth here.
10 Cap properties, people say, “You can’t buy a 10 Cap.” All the time I hear this.
And what does Cap mean? Let me explain. cap is a capitalization rate. The way it works
Is you have all your gross income and you have your itemized expenses.
And then, once you minus out your expenses, you end up with your net, also known
As net operating income. And that NOI, the simple mathematical formula for this
Cap Rate is NOI divided by purchase price, which equals your capitalization rate.
Now, the cap rate can be a single digit or a double digit number. Always remember that
When you buy, you want to buy at a high cap rate. When you sell you want to sell at a low cap rate.
So, the lower the cap rate, the more retail the deal. That’s the way it works.
Sometimes people get that backwards. So what I do is I look for property, and I follow
A 10 Cap type of approach. And with the 10 Cap approach, if you buy on a 10 Cap,
You have an opportunity to purchase the property right, be able to get in there,
Raise rents, fill vacancies, add profit centers, do any capital improvements,
And you will come out with an amazing return on investment. And that’s what this is all about
Return on investment, I can show you exactly how to do it. And finding these 10 Cap properties.
People say it’s hard and you know what, if you’re looking at retail deals,
And you’re just scouring through websites like Loopnet, or CityFeet, or one of these
Websites that just has a bunch of retail property on it. Of course, it’s going to be difficult.
You’re looking for a needle in a haystack, right? I mean, you’re mining for diamonds.
But if you use some simple key identifiers, like days on market, or look at property that’s out there
That’s got a lot of vacancy, then maybe what they’re doing is they’re just on a fishing expedition.
Meaning that they’re just going to put something out there in the marketplace and see who bites.
Because something’s worth what someone’s willing to pay, right? And for that reason,
They’ll go ahead and test the water, throw a ridiculous number out there,
Which is called proforma that’s future value. We’re not talking about buying on proforma.
We talk about buy ads is whereas in its current state and its current condition,
And if you follow my rule of buying “as is,” and looking at value and place meaning huge upside.
Then, you can also justify seller financing. You can justify seller financing
Because the deal does not qualify for bank financing. If it’s gotten a lot of vacancy,
If the rents aren’t raised and it’s not at its highest and best use. So it’ll truly give you
An opportunity to create massive amounts of wealth, be able to create monthly passive income
For financial security. And I’d love to show you how to do it. If you liked this segment,
Go ahead and click the little link in the description
Or better yet just visit my website at and I look forward to engaging with you again real soon.
All right, take care.
To learn more strategies and techniques, visit
Or go ahead and click the link in this video description.
And I look forward to engaging with you real soon.


Wisdom for Wealth Video #1

Wisdom for wealth video #1. Learn the secrets of Commercial Real Estate Wealth.

Ready to Learn How To Profit from Commercial Real Estate?

Pick your copy of Terry Hale's new book today and learn the EXACT Profit Formulas that Terry has personally used to build recurring revenue through Commercial Real Estate.

Hi! I'm Terry Hale and I've been helping people
invest in commercial real estate since 1999. Want me to help you?