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system
why real estate investments are compared via cap rate?
user
cap rate includes any interest on the mortgage and not the repayments of the mortgage. cap rate represents the net income which is the gross rent minus all costs, including the interest on the loan. mortgage repayments form part of your cash flow calculations not your return calculations. roi is a calculation which works out your net income over the initial investment you made, which is you downpayment plus costs and not the value of the property.
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