05/03/2026
Cap Rate = capitalization rate, but what does that mean and why does it matter when you’re looking at income-generating properties.
The formula is:
NOI ÷ Purchase Price = Cap Rate
It’s a helpful tool to understand value - but context matters. A 4% vs. 8% vs. 10% cap rate can mean very different things depending on the type of property, location, and market conditions.
If you’re buying or evaluating an investment property, this is a number you’ll want to understand.