what is cap rate 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.

  • Is cap rate a good measure of a property value?

  • Although cap rate gives a good idea of a property theoretical return on investment, it should be used in conjunction with other metrics such as the gross rent multiplier, among many others. Therefore, other metrics should be used in conjunction with the capitalization rate to gauge the attractiveness of a real estate opportunity.

  • Can a cap rate equal a rate of return?

  • Therefore, a Cap based on an all-cash purchase can never equal a rate of return. A cap rate calculator is used in real estate to find the comparative value of a piece of property to determine if it would be a good investment.

  • What is cap rate (REIT)?

  • What is Cap Rate (REIT)? Cap rate is a financial metric that is used by real estate investors to analyze real estate investments, and determine their potential rate of return. Rate of Return The Rate of Return (ROR) is the gain or loss of an investment over a period of time copmared to the initial cost of the investment expressed as a percentage.

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