Cap Rate, or capitalization rate, is a popular calculation used by real estate investors. Using Capitalization Rate, an investor can:
1. Determine the expected net operating income based on the property’s listed price as compared to other similar properties sold recently.
2. Calculate the price you should offer for a property based on the prevailing cap rates in the area and the net rental income of the property being considered.
3. Using the value/asking price and the net income of a property, you can determine its cap rate and compare that to prevailing rates in the area.


