Tuesday, February 2, 2016

What is a CAP Rate?

Answer: The definition of a Capitalization Rate (CAP) is the rate of return on a real estate investment property based on the expected income generated by the property. CAP rate is used to estimate the investor's potential return on his/her investment. This is calculated by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property.

Capitalization Rate = Yearly Income/Total Value

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