Real Estate & Investing
Cap Rate
Definition
Short for capitalization rate, this is a real estate metric that measures the expected rate of return on an investment property. Calculated as Net Operating Income (NOI) divided by the property purchase price, expressed as a percentage. A property generating $12,000 in annual NOI purchased for $200,000 has a cap rate of 6%. Higher cap rates indicate higher potential returns but typically come with higher risk. Cap rates vary significantly by market, property type, and condition.
Related Templates
These SheetCraft templates use or relate to Cap Rate:
- Rental Property Analyzer, Evaluate rental deals with cap rate, cash-on-cash return, and 10-year cash flow projections, plus a multi-property portfolio tracker.