overall capitalization rate


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overall capitalization rate

(1) Sometimes referred to as the “going-in capitalization rate.” It is the first year's net operating income divided by the acquisition cost of the property. (2) In appraisal,it is the proper discount rate to account for the timing and amounts of all future cash flows from an income-producing property.

References in periodicals archive ?
Results of the overall capitalization rate modeling procedure using the three periods are presented in Exhibit 9.
The biggest increases in overall capitalization rates are forecast to occur in the national regional mall market, as well as the Houston and Northern Virginia office markets, according to estimates.
The Appraisal of Real Estate cites five methods for developing an overall capitalization rate in direct capitalization.
The necessary assumptions built into the theory of "discount rate equals overall capitalization rate plus income growth" are as follows:
Rearranging the relationship, value equals income divided by rate, allows the appraiser to calculate feasibility rent, or the net operating income necessary to support this assertion (net operating income equals cost new plus site value times the overall capitalization rate).
Also, the overall capitalization rate ([R.sub.o]) should not be applied to an income stream that includes only income from real property, when the overall capitalization rate ([R.sub.o]) includes risks from personal property and business intangibles.
For RL [right arrow] [infinity] the ground value term approaches zero, while the annuity factor becomes the reciprocal of the overall capitalization rate respective to perpetuity.
This is identical to the traditional, direct capitalization process in appraisal practice, where value is equal to net operating income (NOI) divided by the overall capitalization rate (V = NOI/[R.sub.o]).
In both cases, the overall capitalization rate is 15.55%, which is the same overall capitalization rate applied in the commercial valuation for the TAB.
In direct capitalization, real estate value ([V.sub.o]) is estimated by capitalizing net operating income ([I.sub.o]), usually the new owner's first-year income, with an overall capitalization rate ([R.sub.o]) using the following formula:
* An appropriate indication of the overall capitalization rate for hotel investments
Residual Cap Rate: Overall capitalization rate used in calculation of