Scott O'Neill
speaker
1,140 appearances
15 recordings
2 series
first heard Jan 2022
last heard 12 May
Scott O'Neill’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in May 2026 with 1.
Appearances
Now, a cap rate is short for capitalization rate.
Capitalization rate is effectively a percentage of a market.
So I'll use an example.
Sydney's capitalization rate for just a general commercial property might be 4%.
If you're collecting $100,000 of rent at a capitalization rate of 4%, all you're doing is $100,000 divided by 0.04, which is 4%.
That's a $2.5 million asset.
If you increase the rent by $10,000 a year,
on that same property with a 4% cap rate, that increases the value of the property to 2.75.
So 10 grand of rent per annum equals 250,000 in capital growth.
It's a very simple equation, which is universally used across the world to calculate the value of commercial property.
So
To answer your question, Craig, yes, it's 100% attached to the value of the rent, but there's also other factors that influence the capitalization rate.
And that's where it starts to get a little bit more scientific because every property might have a slightly different cap rate depending on the security, the length of lease, the type of tenant you've got in there, the age of the building.
That's where it gets a little bit more gray, but the rent is attached to the value.
Yeah, that's right.
I think it's always hard for people to visualise what commercial values and properties look like without going into exact details of properties that you can buy.
So capitalisation rates, we'll look at them versus a few recent client purchases we've done and just go through the numbers.
It can be a bit of a shock because it's been about 10, 11 years since the last rate increase has hit.
So there's a whole generation of investors that have never dealt with this side of property at the moment.
So it's going to make for some interesting reading online.
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