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[quote=Anonymous]Cap rate (capitalization rate) is a metric used to measure the performance of a rental real estate property, providing an estimate of the potential return on investment. Cap rate can help investors quickly assess the value of a property in comparison to other potential investments. To calculate cap rate, follow this formula: (Gross income – expenses = net income) / purchase price * 100. Cap rates between 4% and 12% are generally considered good, but it’s important to remember that other factors, such as potential improvements, should also be considered when evaluating a property. Cap rate does not account for changes in cash flow due to improvements or renovations, and it does not consider leverage.[/quote]
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