There are different schools of thought when it comes to evaluating investment real estate. Some people just want to know if it is "cash flow positive." Some people are looking at the CAP rate, and some more-savvy investors might want to know something called the CAP-X rate.
We evaluate our investment opportunities initially using a CAP rate calculation, which is calculated based on the Net operating income (total rent less operating expenses) divided by the asking or purchase price. If we establish that the property is a potential for our clients' portfolio, we will do our due diligence and determine a CAP-X rate. This rate is more accurate, as it includes estimates of life expectancy for major systems, such as Heating/Ventilation, Roof, Windows, Kitchens, Appliances, etc.
The expected CAP rate fluctuates with market conditions. Here in Oxford County, we have historically seen higher cap rates than comparable properties in the GTA, or other larger markets. That's why Oxford County is such a great place to invest!