I love these so much. On this one, can you explain the math on this part: "that’s an additional $42,000 of revenue a year. At a 5% cap, that’s over $800k in value…"
(Not challenging the math, just not sure I understand the 5% cap of it all.)
It's referring to one way real estate folks determine and discuss the value of buildings: "cap rate," or capitalization rate. Cap rate = net operating income/current market value.
So here, I've used a cap rate of 5% to predict the market value of the additional revenue these changes will create [I'm assuming it's pure add to the NOI, bc these changes don't increase operating expenses]. I don't know the market this building is actually in, so to be fully accurate, I'd need to know that, but 5% is a good stand-in.
My favorite part of your altered plan is that putting the closets between the bedrooms creates an acoustic buffer, so your roommate's alarm (or whatever...) isn't waking you up.
Yeah, that's definitely a plus of doing this kind of layout! I also like to put closets between living areas and bedrooms for the same reasons, if possible. Here, it made more sense to do them between the bedrooms.
I love these so much. On this one, can you explain the math on this part: "that’s an additional $42,000 of revenue a year. At a 5% cap, that’s over $800k in value…"
(Not challenging the math, just not sure I understand the 5% cap of it all.)
It's referring to one way real estate folks determine and discuss the value of buildings: "cap rate," or capitalization rate. Cap rate = net operating income/current market value.
So here, I've used a cap rate of 5% to predict the market value of the additional revenue these changes will create [I'm assuming it's pure add to the NOI, bc these changes don't increase operating expenses]. I don't know the market this building is actually in, so to be fully accurate, I'd need to know that, but 5% is a good stand-in.
Here's some more info: https://www.investopedia.com/terms/c/capitalizationrate.asp
My favorite part of your altered plan is that putting the closets between the bedrooms creates an acoustic buffer, so your roommate's alarm (or whatever...) isn't waking you up.
Yeah, that's definitely a plus of doing this kind of layout! I also like to put closets between living areas and bedrooms for the same reasons, if possible. Here, it made more sense to do them between the bedrooms.