The cap rate is the ratio of net operating income to the property asset value. In other words, it is the percentage of the investment the investor will get back each year from the net income of the property if a deal is bought with all cash.

We have two in-depth articles talking about cap rate. The first one goes through “What is a Cap Rate in Real Estate Investing“. The second article talks about “What is a Cap Rate in Commerical Real Estate Investing“.