I understand the basic calculation of cap rate and COC. I am wondering if certain expenses should be factored into these calculations.
Specifically If I plan to put aside cash reserves at the purchase of a property (6x monthly carry costs) should I include that in my cap rate calculation? My COC calculation? Certainly the funds are not available for other investments but also they are of course not actually spent either.
I have essentially the same question about my due diligence costs. Included in my CR calculation? my COC calculation?
My inclination is neither should be included in my assessment of CR and they should be included in COC as they would reduce year 1 COC but not subsequent years COC. Is that the way to approach it?