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The Valuation Question Cash Flow Or Cap Rates

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In the commercial real estate world, most investors apply value to a property through something called the capitalization rate or, quite simply, the cap rate. The term is universal and means the investment return based on the income that property is expected to generate. Getting to that cap rate is fairly straight forward: It is the ratio between the net operating income (called NOI) produced by the property and the original cost of capital.

BY STEVE BERGSMAN