How Is Cap Rate Calculated?
Cap Rate = Net Operating Income / Current Market Value Of The Property
Current market value is the price you are paying for the property.
Factors Affecting Cap Rate
- Increasing the rent (to an extent, since about half the properties in NYC are rent-stabilized).
- Decreasing the property expenses
- Manage the property yourself (cut management cost)
- Find a more competitive insurance price
Cap Rates In NYC
Even though the rent is also higher (a positive part of the NOI), the high purchase prices keep the cap rates down.