Definition
Net operating income divided by property value, expressing the unlevered annual return a property produces at a given price.
Example
$96,000 of NOI on a $1,600,000 purchase is a 6.0% cap rate.
Related terms
Frequently asked questions
What does Capitalization Rate mean in real estate?
Net operating income divided by property value, expressing the unlevered annual return a property produces at a given price.
How is Capitalization Rate used in practice?
$96,000 of NOI on a $1,600,000 purchase is a 6.0% cap rate.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.