Effective Rate of return.

[James W.]

Hi everyone -

I see Net Lease property listings on the internet.

The bigger brand name tenants have Cap Rate of ~5%.

If I finance this property at 4% mortgage interest - is it correct to say that the net return is about 1%.

For example - a $1MM property leased out to Bank of America with listed 5% Cap Rate. That's ~50K a year.

Now if i get a loan on 750K @ 4% - thats just the payment of $3521*12 = 42K a year.

Add 15K of taxes - 57K.

In fact - there's no return at all in this example.

Am I doing this about right?