What is terminal cap rate?
The cap rate applied to forward (year-after-sale) NOI to estimate the reversion at exit. Often modeled 25 to 50 basis points above the going-in cap rate; a higher terminal cap implies a lower exit value.
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.