Real Estate

Return on Investment - ROI

When discussing real estate returns, what is a “cap rate”?

Many real estate investors use a cap rate to understand the amount of income generated, compared with the amount of cash expended to acquire the investment. It is computed by dividing your net operating income assumptions by your cost of purchase, expressed as a percentage. If your investment property earns $12,000 per year, and you purchased it for $100,000, your cap rate would be 12%.


This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App