Cap rate & value

[Vincent Gamboa]

Hello all,

I am brand new to real estate investing and my knowledge is all from the books and podcasts I have read and listened to. One subject I can't seem to wrap my head around is how a property owner chooses thier price and cap rate? Doesn't the cap rate depend on the price, as well as the price depend on the cap rate? So how do you calculate cap rate and true property value, when only given the NOI?

Thank you all in advance for the information and guidance.

-Vince

[Ruth Bayang]

Find out what the average cap rate is where that property is located.
For example, a property in Seattle would average around a 5% cap.

A similar property in Anytown, Texas would be 7.5%.

They may have the same NOI but you'll be paying more to buy that property in Seattle.
Generally, it is dependent on the market where the property is located.