==Basic formula== ==Explanatory Examples== For example, if a building is purchased for $1,000,000 sale price and it produces $100,000 in positive net operating income (the amount left over after fixed costs and variable costs is subtracted from gross lease income) during one year, then: The asset`s capitalization rate is ten percent; one-tenth of....
The discount rate used to determine the present value of a stream of expected future cash flows.
Is the estimated percentage rate of return which will be returned from the owner`s investment.
A method of constructing a replicating portfolio in which the manager purchases a number of the most
The capitalization rate (cap rate) indicates the potential rate of return on a real estate investment, taking into account the income that the property is likely to generate by comparing the property value and it?s NOI.