{"id":915,"count":2,"description":"\r\n\r\nJump to: \r\nWhat is Capitalization Rate (Cap Rate)?<\/a>\r\nHow is a cap rate calculated?<\/a>\r\nIs it better to have a high or a low cap rate?<\/a>\r\n\r\nWhat is Capitalization Rate (Cap Rate)?\r\n\r\nCapitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.\r\n\r\n\r\n\r\n\r\nHow is a cap rate calculated?\r\n\r\nTo find out what the cap rate for a building is, the net operating income (NOI)\u2013that is, the annual revenue a property yields minus its operating costs\u2013is divided by the market value or sale price of the property.\r\nFor example, if we have an office building with a current market value of $13,000,000, and a NOI of $1,170,000, the cap rate would be 9%.\r\n\r\n\r\n\r\n\r\n\r\nIs it better to have a high or a low cap rate?\r\n\r\nInvestors\/buyers generally look for higher cap rates, since that usually means they acquired the property for a lower sale price and that the investment will start paying for itself soon. On the flip side, these properties come with higher risk levels.\r\n\r\nLandlords\/sellers are pushing for lower cap rates because they show the property succeeded in getting a higher sale price. These buildings present lower risk levels, but sometimes the low cap rate might also signal low demand within the market.\r\n\r\nFor commercial real estate properties, a cap rate of 4-10% per year is considered a reasonable range for investors. However, when trying to establish whether a cap rate is high or low in a specific situation, there are several things one must bear in mind:\r\n- The property type (residential buildings present lower risk levels, so they tend to have lower cap rates, followed by office, industrial, retail, hotel properties)\r\n- Market type (primary, secondary, tertiary) and conditions\r\n- Tenant quality\r\n- Lease expiration date.\r\n\r\n\r\n\r\n\r\n\r\nYou might also be interested in:\r\n\r\nWhat is eviction?<\/a>\r\nWhat is fiduciary?<\/a>\r\nWhat is financing\/mortgage contingency?<\/a>\r\n\r\n\r\n\r\n\r\n\r\n\r\nSearch other terms\r\n\r\n\r\nA<\/a>\r\nB<\/a>\r\nC<\/a>\r\nD<\/a>\r\n\r\n\r\nE<\/a>\r\nF<\/a>\r\nG<\/a>\r\nH<\/a>\r\n\r\n\r\nI<\/a>\r\nJ<\/a>\r\nK<\/a>\r\nL<\/a>\r\n\r\n\r\nM<\/a>\r\nN<\/a>\r\nO<\/a>\r\nP<\/a>\r\n\r\n\r\nQ<\/a>\r\nR<\/a>\r\nS<\/a>\r\nT<\/a>\r\n\r\n\r\nU<\/a>\r\nV<\/a>\r\nW<\/a>\r\nX<\/a>\r\n\r\n\r\nY<\/a>\r\nZ<\/a>\r\n\r\n\r\n\r\n\r\n\r\nPopular terms\r\n\r\n\r\n\r\n\r\nAmortization<\/a>\r\n\r\n\r\nEquity <\/a>\r\n\r\n\r\nNotary Public <\/a>\r\n\r\n\r\nProgression\/Regression<\/a>\r\n\r\n\r\nAcquisition <\/a>\r\n\r\n\r\nAnnuity <\/a>\r\n\r\n\r\nAsset <\/a>\r\n \r\n \r\n Fiduciary <\/a>\r\n\r\n \r\n Inflation <\/a>\r\n\r\n \r\n Contingency <\/a>\r\n\r\n \r\n Escrow<\/a>\r\n\r\n \r\n Power of attorney <\/a>\r\n\r\n \r\n Real Estate Agent <\/a>\r\n\r\n \r\n Eminent Domain <\/a>\r\n\r\n \r\n Liability <\/a>\r\n\r\n \r\n Statute of Limitations<\/a>\r\n\r\n \r\n Valid <\/a>\r\n\r\n \r\n Variance<\/a>\r\n\r\n \r\n Contiguous <\/a>\r\n\r\n \r\n Deficit<\/a>\r\n\r\n\r\n\r\n\r\n","link":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/","name":"Capitalization Rate","slug":"cre-term-capitalization-rate","taxonomy":"post_tag","meta":[],"yoast_head":"\nWhat is Capitalization Rates? - Commercial Real Estate Dictionary<\/title>\n<meta name=\"description\" content=\"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Capitalization Rate Archives\" \/>\n<meta property=\"og:description\" content=\"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/\" \/>\n<meta property=\"og:site_name\" content=\"CommercialCafe\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"CollectionPage\",\"@id\":\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/\",\"url\":\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/\",\"name\":\"What is Capitalization Rates? - Commercial Real Estate Dictionary\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialcafe.com\/blog\/#website\"},\"description\":\"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/#breadcrumb\"},\"inLanguage\":\"en-US\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.commercialcafe.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Capitalization Rate\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.commercialcafe.com\/blog\/#website\",\"url\":\"https:\/\/www.commercialcafe.com\/blog\/\",\"name\":\"CommercialCafe\",\"description\":\"Your Commercial Real Estate Blog\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.commercialcafe.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"What is Capitalization Rates? - Commercial Real Estate Dictionary","description":"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/","og_locale":"en_US","og_type":"article","og_title":"Capitalization Rate Archives","og_description":"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.","og_url":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/","og_site_name":"CommercialCafe","twitter_card":"summary_large_image","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"CollectionPage","@id":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/","url":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/","name":"What is Capitalization Rates? - Commercial Real Estate Dictionary","isPartOf":{"@id":"https:\/\/www.commercialcafe.com\/blog\/#website"},"description":"Capitalization Rates (Cap Rates) offer a way to measure the levels of risk that investing in a certain property may bring to any interested parties.","breadcrumb":{"@id":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/#breadcrumb"},"inLanguage":"en-US"},{"@type":"BreadcrumbList","@id":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-capitalization-rate\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.commercialcafe.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Capitalization Rate"}]},{"@type":"WebSite","@id":"https:\/\/www.commercialcafe.com\/blog\/#website","url":"https:\/\/www.commercialcafe.com\/blog\/","name":"CommercialCafe","description":"Your Commercial Real Estate Blog","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.commercialcafe.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/www.commercialcafe.com\/blog\/wp-json\/wp\/v2\/tags\/915","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.commercialcafe.com\/blog\/wp-json\/wp\/v2\/tags"}],"about":[{"href":"https:\/\/www.commercialcafe.com\/blog\/wp-json\/wp\/v2\/taxonomies\/post_tag"}],"wp:post_type":[{"href":"https:\/\/www.commercialcafe.com\/blog\/wp-json\/wp\/v2\/posts?tags=915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}