Definitions for

**"CAPITALIZATION RATE"****Related Terms:**Capitalization, Overall capitalization rate, Cap rate, Direct capitalization, Income approach, Income capitalization approach, Net income multiplier, Rate of return, Total rate of return, Income approach to value, Internal rate of return, Rate base, Accounting rate of return, Return on capital, Irr, Return, Nominal return, Real return, Npv, Gross investment, Gross income multiplier, Net interest margin, Net present value, Economic value added, Gross rent multiplier, Real rate of return, Eva, Hurdle rate, Gross yield, Weighted average cost of capital, Grm, Yield, Ffo, Return on investment, Cash-on-cash return, Return on invested capital, Total return, Running yield, Average rate of return, Adjusted present value, Investment return, Depreciation, Financial management rate of return, Profitability index, Modified internal rate of return, Adjusted basis, Land residual technique, Appreciation rate, Funds from operations

A rate of return used to derive the capital value of an income stream. The formula is Value = annual income capitalization rate

Rate used to discount future income to estimate present value. Net operating income divided by total investment. Also "free and clear return."

The rate used to convert an income stream to a present value, which can be used to estimate the value of real estate under the income approach to value.

The desired return (profit) you desire to determine valuation of a business, expressed as a percentage return on your investment.

The discount rate used to determine the present va... Add a comment

the discount rate used to determine the present value of an infinitely lived asset.

The discount rate used to determine the present value of a stream of future earnings. Equals normalized earnings after taxes divided by present value, expressed as a percentage.

The rate that reflects the relationship between the value of a property and its net operating or rental income. See Income Approach. Mathematically, it is the result of dividing a propertyâ€(tm)s net income by its value. It is sometimes called a rate-of-return or return-on-investment.

Also known as "return on and return of" capital, the capitalization rate is simply the ratio of the value of an investment and the net income that is derived from the investment of security.The capitalization rate is usually expressed in percentages and can help investors decide whether an investment is a good deal or not.

The rate of expected return on investment property. A ratio of income to value.

Any divisor used to convert the anticipated economic benefits of a single period into a value.

The rate of return on net operating income considered acceptable for an investor and used to determine the capitalized value. This rate should provide a return on, as well as a return of, capital.

is the rate used to convert a property's anticipated future annual income into a present value. The capitalization rate varies with the quality and condition of a property, interest rates and real estate market conditions.

The capitalization rate (or "cap" rate) for a property is determined by dividing the property's net operating income by its purchase price. Generally, high cap rates indicate higher returns and greater perceived risk.

a rate used to convert an income stream into an estimate of value

a ratio used to estimate the present value of an income-producing investment

The Company defines cap rates as net operating income (NOI) divided by cost where NOI represents budgeted cash operating income for the current year at current occupancy rates and at rental rates currently in place with no adjustments for anticipated expense savings, increases in rental rates, additional leasing in the first six months of ownership or straight line rent. Leases that expire during the year are assumed to roll to market unless interviews with the customer reveals that the customer will renew. If the property will be self-managed, the net management fee in year one is added to the NOI. Cost is defined as purchase price plus estimated closing costs plus anticipated capital expenditures during the first 12 months of ownership for customer improvements, commissions, upgrades and cosmetic capital improvements (4F Program) to bring the building up to the Company's standards.

The ratio between a property's net operating income and the sum of its purchase price (or value) and capital additions.

The percentage ratio between net income from investment and the value of the investment. Commonly expressed as "return on and return of" capital.

Any multiple or divisor used to convert a single period (usually a year) of anticipated economic benefits into a present economic value.

The conversion of a future net income stream into present value by using a specified desired rate of earnings as a discount rate. This capitalization rate is divided into the expected periodic income to derive a capital value for the expected income.

Any rate used to convert income into value.

The assumed rate of return on an investment in real estate. The capitalization rate is commonly used in the valuation of commercial and investment property because it directly links the value to the income produced by the property.

The rate of return (usually expressed as a percentage) that is used to convert a point estimate of cash flow into value. The inverse of the capitalization rate is referred to as the multiple. Alternately, a divisor used to convert a uniform (or constant) stream of cash flow to a capital amount, or value.

The relationship of income to capital investment or value, expressed as a percentage.

The rate of interest which is considered a reasonable return on an investment. The capitalization rate is used to determine the value based upon net income.

The rate of return an investor wants to achieve on real property. The capitalization rate can provide for the return of the investment and the return on the investment (profit). To obtain a property’s capitalization rate, divide the net operating income of a property by its value. To determine a property’s value, divide the property’s net operating income by the desired capitalization rate. In the Income-Capitalization Method of real property appraisal, a capitalization rate is used to appraise a property’s value. The Income-Capitalization Method of appraisal is used to value investment property, such as apartment buildings, commercial office buildings and retail malls. (See Net Operating Income)

The ratio between net income and value. The current value of a property can be estimated by dividing its current or stabilized net income by the appropriate capitalization rate.

The rate that is believed to represent the proper relationship between the real property and the net operating income generated from the property.

1). TO DETERMINE CAPRATE = Divide the Net Operating Income (NOI) by PRICE or VALUE. 2.) TO DETERMINE PRICE or VALUE FROM A DESIRED CAPRATE: Divided THE NOI by CAPRATE.

The rate of interest used to discount the future income from a property to arrive at a present value.

The percentage used to establish the value of income property.

An estimated percentage rate of return that a property will produce on the owner's investment.

The ratio between net income from a real estate investment and the value of the investment. Cap Rate = NOI/Value.

the ratio of the first year NOI to the asking price (NOI/Asking price). Not the rate of return.

The rate at which net operating income is discounted to determine the value of a property. It is the net operating income divided by the sales price or value of a property expressed as a percentage. [Go to source

The rate of interest used in calculating the present value of future periodic payments.

Cap Rate represents the annual return on an investment before mortgage payments and income taxes. To find a Cap Rate use the following formula: Cap Rate = Net Operating Income / Market Value x 100.

Any rate used to capitalize income.

The percentage selected for use in the income approach to valuation of improved property. The cap rate is designed to reflect the recapture of the original investment over the economic life of the improvement, to give the investor an acceptable rate of return (yield) on the original investment, and to provide for the return on borrowed capital. For example, a 10% CAP rate means an investor would receive $10 every year, in perpetuity, if they paid $100 for the building. It is supposed to measure the degree of risk of the investment which would include quality of income stream, probability of continuing, and the overall market.

The rate that is considered a reasonable return on investment (on the basis of both the investor's alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. Also called "free and clear return". See " Capitalization".

A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by purchase price. Also referred to as cap rate.

A method used to estimate the value of a property based on the rate of return on investment.

(Cap Rate) If one were to pay all cash for a building the cap rate illustrates the straight percentage return on an investment. It should be noted that appreciation is not taken into account in calculating a cap rate. A Capitalization Rate, for a given property is obtained by dividing the net operating income by the purchase price.

A percent return on an investment based upon the full price of the property and the property's net operating income (NOI).

Net Operating Income divided by Market Value. If the net operating income is $100,000 and the market value of the property is $1,000,000 then the cap rate is 10%. This is one of the most commonly heard real estate investing term.

The percentage rate applied to the income a property is expected to produce to derive an estimate of the property's value; includes both an acceptable rate of return on the amount invested (yield) and return of the actual amount invested (recapture).

The percentage (acceptable to an average buyer) used to determine the value of income property through capitalization.

The unleveraged return generated through the operation of a property, expressed as the percentage determined by dividing the Net Operating Income from the property (see "NOI") by its cost or value.

The percentage rate of return estimated from the net income of a piece of property.

A percentage rate composed of return on investment, risk factors and rate of recapture. Principally used to determine the economic value of an investment by dividing the rate into the net operating income.

any divisor (usually expressed as a percentage) used to convert anticipated benefits into value.

The rate of return a property will produce on the owners investment.

The relationship between the net income from a real estate investment and the present value

Also known as the "Cap Rate"; it is the rate of interest which is considered a reasonable return on an investment. It is used during the process of determining value based upon net income. A cap rate considers the quantity, quality and durability of the income. Capitalization rates are calculated using three methods; Market Comparison, Band of Investment and Summation.

A methodology to estimate the value of a property based on the rate of return on investment (ROI).

the percentage of return on an investment when purchased free and clear on a cash basis.

The expected rate of return on investment property; the ratio of income to value.

The rate that includes both a return on an investment as well as the return on the amount invested.

A Capitalization Rate (or "Cap Rate") is a measure of the ratio between the net income produced by an asset (usually real estate) and its capital cost (the original price paid to own the asset).

cash dividend cash flow