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Capitalization Rate: Everything You Need to Know

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

By Matthew DiLallo – Updated Feb 12, 2025 at 5:21PM

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.
Key findings are powered by ChatGPT and based solely off the content from this article. Findings are reviewed by our editorial team. The author and editors take ultimate responsibility for the content.

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