I caution you to not consider this a return on investment. The CAP rate does not calculate your return compared to the financial investment. As Tracy M of NY says, it is an indicator, in this case a percentage, to compare/measure the value of the investment. The higher the CAP rate, the better value to the buyer. Calculate the annual NOI (without mortgage/debt service) divided by the price or value of the center. The cash-on-cash calculation percentage represents more of a retrun on investment, but would still need to add in depreciation and tax effects to get a true return on investment.
Sep 28, 2009