"Cap rate is based on the rate of annual net profit before debt and taxes divided by the purchase price". This is the same for Multi-family, industrial, office buildings or retail property.
However, if you are calculating the cap rate from a statement of an operating business or income
producing property, it is then "before debt service, taxes, principles (owners) income, depreciation (amortization), divided by the purchase price.
Then, do a little research and find what is an acceptable cap rate for a similar type of business or
property. It is no different than doing comp's.
Jan 2, 2012