Episode Overview

In this episode of Ironclad Underwriting, host Jason Williams is joined by commercial real estate investor Frank Patalano to unpack one of the most essential concepts in commercial underwriting: the Cap Rate. They break down how it’s calculated, what influences it, and how rising interest rates impact valuations. Plus, they dive into forced appreciation strategies and why smart underwriting goes far beyond the cap rate itself.

📌 Topics Covered

✅ Why cap rates rise with interest rates, and the dangers if they don’t

✅ How to calculate a property's value using cap rate and NOI

✅ Market-based, class-based, and age-related influences on cap rate

✅ Real-world examples of forced appreciation and value-add strategies

✅ Why relying only on cap rate can mislead your investment outlook

✅ The difference between natural and forced appreciation

✅ The role of exit cap rate and how to forecast it responsibly

✅ Advice on finding your local market cap rate range

💬 Key Quotes

✅ "If you have a lower cap rate than your interest rate, you're asking for trouble—or you're taking on a horrible loan."

✅ "Cap rate is just a tool. Your real driver should be the return metrics—cash-on-cash, IRR, AAR—not the cap rate alone."

✅ "Tenants are your customers. If you're going to raise rents, give them something in return."

🎧 Connect with Jason:

✅ LinkedIn

✅ https://IroncladUnderwriting.com

✅Linktree

🎧 Connect with Frank:

✅LinkedIn