# what is a good cap rate

## what is a good cap rate for rental property

Cap rates are expressed in percentages and are returns for a single point. They can be used to assess an investment property or to compare properties.

## cap rate formula —

This same cap rate formula can be used to estimate the building's value based on its NOI. If you know that the property generates \$500,000 in NOI, and that the appropriate cap rate (i.e. unlevered return) is 5% for a comparable project in the market, then you can divide \$500,000 by 5 to get a \$10 million value. The same project could be worth only \$8.3 million if the market cap rate is 6%. This illustrates how changing return expectations in the market (in this instance, the cap rate), can cause implied real property values to fluctuate as discussed further below.

## whats a good cap rate for rental property

Cap rates can be used to determine which investment is more risky or safer. A lower cap rate generally means that it is safer or less risky to invest, while a higher rate can mean more risk.

## what is a good cap rate for a rental property

Cap rates can often be compared with a coupon on a bond because they allow you to express payment in a percentage of an asset's value.

## what is a good cap rate

Real estate investing's "cap rate" is the unlevered return on an asset that is based on its annual net operational income (NOI).

## good cap rate for rental property

﻿When evaluating the performance or potential real estate investment, the cap rate (or capitalization rate) is the most frequently used return metrics.

## whats a good cap rate for a rental property

A cap rate can be calculated by simply dividing the annual NOI by the market value. A property worth \$10,000,000 and generating \$500,000 in NOI would have an annual cap rate of 5%.