i have a few good books i got from books a million, the complete guide to real estate investing and all about r e investing. the formula to figure it out is this: theoretically with a cap of 10, an income stream of 100000 per year is worth 1,000,000. to figure it you take the income stream and multiply it by 10 years it gets pretty in debth so ill keep it short on the site but ill be glad to send it to you if you want it.

if you are asking what a cap rate is then someone else did the homework, go over the numbers yourself and determine if it is worth it to you. this info came from the pm. check it out for yourself because something is not right. if it had a 12 or even a 10 this deal would already be gone.

Yes, this ad came from the classifieds. I don’t know anything about buying a park, hence the question. When I divide the number of home sites by the price, I get one of the lowest prices per lot that I’ve seen in parks advertised online. I am looking to try and have an experienced park investor look at this particular set of numbers and give me an idea if it’s good or bad. Just trying to learn something about the process. Thanks for your input, even though I still don’t know what a “Cap” rate is. You said that if it was a 12 or 10 it should be gone by now. It just came on the market with a price reduction, according to the ad. Any more info is greatly appreciated.

this is a pretty good formula c+y-I followed by R+y-(MC)

C is a constant or a coefficient
Y is the desired yeald to equity (Cash invested)
M is the percentage of loan to value
i interest rate of financing

it works like this

you want to buy the park
there will be a 75 percent new loan in place at closing
interest rate of 8.5 percent
you are willing to buy the building only if you can yeald 13 percent on your investment

what then is the cap

c+y-I or c=13-8.5
therefor c+4.5
then r+y-(mc) or R=13-(.75x 4.5)
therefor, r+13-3.38 or 9.62 percent (thats the cap)

to value the investment you will take the net income (before expences) and divide it by the the cap you are looking to produce. and that is how its done. don’t go by there figures, first they don’t know how much you have to invest, second they don’t know the interest rate on your credit, third they don’t know what you plan to do to improve the property. and a cap is only as accurate as you make it and it does not account for expences. cap could be any number and is only used to figure value. don’t count on it because the bank won’t when they appraise it for a loan.