Property Management
In South Carolina, what is a 'cap rate' versus a 'cash-on-cash return' in property management analysis?
AThey measure the same thing
BCap rate measures the unlevered return on value; cash-on-cash return measures actual cash return on the equity invested✓ Correct
CCap rate is for commercial properties; cash-on-cash is for residential
DCash-on-cash is always higher than the cap rate
Explanation
Cap rate (NOI/Value) measures unlevered property performance, independent of financing. Cash-on-cash return (annual cash flow after debt service / equity invested) measures the return on the investor's actual equity, accounting for leverage effects.
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