REAL ESTATE NOTES:

4 conditions for cap rate to work:

1. fully leased building (90%)
2. number of recent sales of similar buildings
3. relatively stable real estate and financial market conditoins
4. no unique issues like excess land, available for development, environmental issues, physical problems with the buildings

im currently sitting in a real estate class and the professors treats us like primary school idiots. well, not to take all the credits away, he does provide very valuable insights once in a blue moon. on the other hand, he gave us 10 mins to do a group discussion on something that only needs 30 seconds. the homework assignment that could be done in groups of 4s could be done by 1 person in 1 hour too. i guess that would be for the better, since its the only course that i could relax and chill.

Cap rates continued...
Macro factors
-Credit Availability
-Inflation Expectations
-Tax Policy
-Economic Growth GDP
-Interest Rates
-Alternative Investments

Micro(property)
-DD&SS
-Asset Class
-Condition/Quality of budiling (age)
-Location
-Lease term (longer lease term, lower cap rate)
-Credit of Tenant

Conclusion for determination of cap rate:
It is very complex, everything is inter-related, and therefore there is no right formula to determine the "right" cap rate.