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In this brief Money Minute, real‑estate broker and investor TC Cooksley from Virginia warns viewers that advertised cap rates can be misleading. He shares his experience of finding advertised rates that were far higher than his own calculations after reviewing rent rolls. Cooksley explains that a cap rate is the rate of return on a property and outlines how to calculate a realistic cap rate: adjust gross income for a vacancy factor (at least 5%), subtract operating expenses such as property‑management fees and repair costs, and factor in the total purchase price and associated acquisition costs. He emphasizes the importance of understanding these components to assess a property's true profitability before investing.
