cap rate

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Capitalization Rate

The net income an asset produces in a given year divided by its purchase price. The capitalization rate is used to help determine the rate of return, or how fast an asset pays for itself and begins to make a profit. For example, if an asset cost $1,000,000 and it produces $100,000 in a given year, the capitalization rate is 10% and it will take 10 years to pay for the asset with the money it produces. However, it is important to note that the capitalization rate may change from year to year. For example, the same asset could produce $100,000 in year one but $250,000 in year two. It is informally known as the cap rate.

cap rate

See capitalization rate.

References in periodicals archive ?
Treasury rate to jump further, potentially leading to further cap rate stabilization if risk premiums compress, or higher cap rates if risk premiums hold pat or also increase.
Even with an increased supply and compressed cap rate levels, bidding for net lease assets has been favorable to sellers," Feeney said.
The cap rate for mid- and high-rise properties in major metros dipped to 3-6 percent, or nearly 20 bps under the rates seen during the condo conversion craze of the mid 2000s.
Over the next six months, investors surveyed by Brookfield Financial expect the cap rate will hold steady despite the rise in interest rates.
Since December, the average cap rate for office transactions was 7.
In appraisal textbooks, the relationship between discount rates and overall capitalization rates, or cap rates, is a simple one: Discount rate = cap rate + income growth rate or
Other points of interest in the 2007 Cap Rate Report include the fact that the Midwest region has the highest average cap rate in the U.
The higher the quality of the property, the lower the CAP rate
Are you a full bear, meaning you don't believe that the cap rate spread has changed?
The sale to a condominium converter was at a cap rate of 3.
The cap rate on that deal, based on the sellers trailing twelve month NOI was approximately 3.
The entire portfolio was acquired for $75,220,000 with a blended 7% pro forma CAP Rate and a 4.