What Is an MSA?
An MSA is a metropolitan statistical area, which is an urbanized area with a minimum population of 50,000.
We at Redwood Capital focus on areas with a growing population of 100,000 or more.
What is a Cap Rate?
A cap rate (capitalization rate) is the value that a commercial property is valued at. It is the net operating income divided by the purchase price of the asset or property.
For example, you have mobile home park named Sunset Villa that sells oversees 100 lots that grosses $144,000 of houses in a year. After your property taxes, property insurance, maintenance, utilities and other expenses you are left with $50,000. This is your net operating income (NOI).
Sunset Villa NOI /Sunset Villa Purchase Price = Cap Rate
Sunset Villa could be sold for $500,000. This would be calculated: $50,000/$500,000 = Cap Rate
Cap Rate = 10%