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Capitalization Rate: Everything You Need to Know

Learn everything you need to know about real estate capitalization rates.

By Matthew DiLalloUpdated Feb 12, 2025 at 5:21 PM

Key Points

  • A cap rate helps determine if a real estate investment is worth pursuing.
  • The cap rate formula involves dividing a property's net operating income (NOI) by its purchase or appraised value.
  • Higher cap rates suggest higher return potential but also greater investment risks.

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