what is cap rate in real estate

Best answer

Capitalization rate

People also ask

  • What is cap rate in commercial real estate?

  • Cap rate, or capitalization rate, is the ratio of a property net income to its purchase price. It an essential number for gauging a property rental income potential.

  • What is cap rate and why does it matter?

  • Still, a cap rate with supplemental data and information can significantly mitigate the amount of risk an investor will be exposed to over the course of an investment. Therein lies the benefit of learning how to calculate cap rate: the resulting number can mitigate more risk than many investors realize.

  • What determines the cap rate of a rental property?

  • The cap rate will vary based on several things, not all of which directly affect the property’s value. The age of the property, the desirability of the area, and the demand for rental properties in the neighborhood are a few such factors.

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