Understanding Cap Rates, Yield on Cost, Development Spread, and IRR

Understanding Cap Rates, Yield on Cost, Development Spread, and IRR

In this episode of the AAA Storage Podcast, we discuss the intricate details of real estate investing, focusing on crucial financial metrics like Cap Rates, Yield on Cost, Development Spread, and Internal Rate of Return (IRR). With expert insights from Paul Bennett, we explore how these metrics help investors evaluate properties and predict potential returns. Whether you're a seasoned investor or looking to understand the fundamentals, this episode offers valuable guidance on navigating real estate investments with confidence.

Key Highlights

• Understanding Cap Rates: Learn how cap rates are used to evaluate property values and their influence on risk-adjusted returns.
• Yield on Cost Explained: Discover why yield on cost is vital for real estate developers and its impact on profitability projections.
• Development Spread Insight: Understand the relationship between yield on cost and market cap rates in assessing project returns.
• Internal Rate of Return: Explore how IRR serves as a key measure of an investment's potential growth for investors.
• Overcoming Project Challenges: Paul shares strategies to manage unforeseen project hurdles and maintain target returns.

Quotes

• "We begin with the end in mind—driven by the internal rates of return we can provide our investors." – Paul Bennett
• "Yield on cost and development spread point to the potential return of a project." – Paul Bennett
• "No projection will match reality; it's how you handle the challenges that matter." – Paul Bennett

Episoder(35)

Small-Bay Industrial: The Asset Class Institutions Just Discovered

Small-Bay Industrial: The Asset Class Institutions Just Discovered

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Oil, Wells & Monthly Cash Flow: How Accredited Investors Are Diversifying Into the Permian Basin with King Operating

Oil, Wells & Monthly Cash Flow: How Accredited Investors Are Diversifying Into the Permian Basin with King Operating

Join us as we explore the world of oil and gas investing with Rachel Griffith and Tom Gray from King Operating Corporation. Together with Paul Bennett, we discuss how oil and gas can play a strategic ...

31 Mar 38min

Waterfall Structures Decoded: How We Split Profits With Our LPs — And Why We Structured It This Way

Waterfall Structures Decoded: How We Split Profits With Our LPs — And Why We Structured It This Way

In this episode, Paul Bennett demystifies the mechanics of investment waterfalls—how profits and returns are distributed between investors and sponsors. He explores the critical differences between Am...

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What Business Owners Should Look for in Real Estate Investing

What Business Owners Should Look for in Real Estate Investing

In this episode, Paul Bennett explores how entrepreneurs and business owners can build long-term wealth through real estate investing. Paul breaks down the differences between active and passive inves...

3 Mar 36min

What Medical Professionals Should Look for in Real Estate Investing

What Medical Professionals Should Look for in Real Estate Investing

In this episode, Paul Bennett explores the opportunities and challenges of passive real estate investing for medical professionals. They discuss why traditional wealth-building strategies often fall s...

17 Feb 29min

Fund of Funds Overview

Fund of Funds Overview

Join us as Paul Bennett, Managing Director at AAA Storage, breaks down Fund of Funds investing. Paul explains how this approach is opening doors for everyday professionals—not just financial experts—t...

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Flagship Healthcare Real Estate with Brannen Edge

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Join us for a special episode as Paul Bennett sits down with Brannen Edge, President and CEO of Flagship Healthcare, to explore the world of medical real estate and private REITs. Brannen shares his j...

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2026 Market Outlook

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Join Paul Bennett as he breaks down the 2026 market outlook for self-storage and commercial real estate. In this episode, Paul shares data-driven insights into interest rates, economic trends, shiftin...

22 Des 202538min

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