What is cap rate?
Capitalization rate: NOI ÷ Property Value. A valuation metric comparing a property’s net operating income to its price to gauge the approximate expected yield. Lower cap rate = higher price per dollar of NOI.
Where you will use it: this term comes up in the Real Estate Finance course, and the full course glossary collects every term in one place.
Related terms
From the free Real Estate Finance course by Devon Coombs, CPA, MBA.