Cap Rates and Interest Rates - Winter 2019

As interest rates inch upward, so too will yields as reflected in Capitalization Rates (cap rates) for investment properties. Remember: The lower the cap rate, the higher the price. Despite Federal Reserve moves on benchmark interest rates, though, the best real estate locations will hold their value (and thus continue to sell for the lowest cap rates) while marginal properties that sell based on income will sell for lower prices. If you have questions about the inverse relationship between prices and cap rates, or desire advice on purchasing real estate relative to its yield, please call us at Harshman & Co. We’d be happy to assist you.