Why agents care
Cap rate is often the first number an investor checks. Pre-filling realistic rents and expenses on rental listings makes the cap rate credible.
Glossary term
Cap rate
Capitalization rate is a property's annual net operating income (rent minus operating expenses and vacancy, excluding debt payments) divided by its price or value. It lets investors compare properties and markets regardless of how they're financed.
Example
Example: $24,000 net operating income on a $375,000 property is a 6.4% cap rate.
Pairs well with
Calculators that use this term
Related terms
Questions by topic
Cap rate: common questions
Is a higher cap rate better?
It means more income for the price, but often reflects higher risk or a weaker location.
Does cap rate include the mortgage?
No. It's calculated before financing.
Put these numbers in front of your visitors
Calculators with built-in definitions, free on the Agent plan.