Real Estate & REITs
Why does a LOWER cap rate mean a HIGHER property value?
Model answer
Because value = NOI / cap rate, the cap rate sits in the denominator: the same $5 million of NOI is worth $5M / 0.05 = $100 million at a 5% cap but $5M / 0.04 = $125 million at a 4% cap. A low cap…
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