Cap rate is short for capitalization rate.It is a ratio between of income (NOI) from a property and the value (usually price paid)
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CAp rate is the rate of return a reasonable investor would expect to earn on his/her money. It is commonly used in conjuction with net operating income to value a property via the income approach. Below is a link to my website www.fairviewlending.com that talks about Cap rates and the inverse relationship with value.
Think of it as the curb appeal of an investment. Its a starting point for evaluating a potential acquisition, but it's just that a starting point.
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