Capitalization rate

Capitalization rate,

Definition of Capitalization rate:

  1. Business valuation: Reciprocal of the desired rate of return multiplied by the normalized earnings of a business to arrive at its purchase price.

  2. General: Discount (or interest) rate used to determine the present value of a series of future earnings from an investment.

  3. The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. This measure is computed based on the net income which the property is expected to generate and is calculated by dividing net operating income by property asset value and is expressed as a percentage. It is used to estimate the investor's potential return on their investment in the real estate market.

  4. While the cap rate can be useful for quickly comparing the relative value of similar real estate investments in the market, it should not be used as the sole indicator of an investment’s strength because it does not take into account leverage, the time value of money and future cash flows from property improvements, among other factors. There are no clear ranges for a good or bad cap rate, and they largely depend on the context of the property and the market.

  5. Real estate: Ratio of rental income from a property to its market value, expressed as a percentage. This rate is used in comparing rate of return from a property with the rate of return from alternative investments.

How to use Capitalization rate in a sentence?

  1. This ratio, expressed as a percentage, is an estimation for an investor's potential return on a real estate investment.
  2. Capitalization rate is calculated by dividing a property's net operating income by the current market value.
  3. Cap rate is most useful as a comparison of relative value of similar real estate investments.

Meaning of Capitalization rate & Capitalization rate Definition

Capitalization Rate,

Capitalization Rate Definition:

  • Capitalization Rate refers to In the world of commercial real estate, the capitalization rate (also known as the capitalization rate) is used to indicate the rate of return that should be incurred on an investment property. This ratio is calculated based on the expected net income of the property and is calculated by dividing the operating income by the equity value of the property and expressing it as a percentage. This property is used to estimate the potential return of investors in the immovable market.

    • The rate of capital is calculated by dividing the operating income of the property by its current market value.
    • This ratio, expressed as a percentage, is an estimate of the potential return on an investor's immovable property.
    • The rate of capital is most useful for comparing the relative values ​​of similar real estate investments.

Literal Meanings of Capitalization Rate


Meanings of Capitalization:
  1. Provide capital to a company or convert income or assets into capital.

  2. Recording or printing operations are enabled or enabled.

Sentences of Capitalization
  1. Most importantly, the idea that the value of an asset is an investment in the flow of future service that the asset should reject.

  2. More specifically, if the investment in the first letter of a noun serves as a reference point for a class of words, it will affect the structural extraction and, therefore, the effect of missing letters.


Meanings of Rate:
  1. Pay a fixed price or charge something for something, especially good or service.

Sentences of Rate
  1. They were asked to assess their abilities in various driving exercises

Synonyms of Rate

charge, price, cost, tariff, hire, fare, figure, amount, outlay, assess, evaluate, appraise, weigh up, judge, estimate, calculate, compute, gauge, measure, adjudge, value, put a value on, consider to be, judge to be, reckon to be