Cap Rate
The ratio between stabilized income and asset value.
Definition
Cap Rate is The ratio between stabilized income and asset value. It comes up most often when the property has to be judged as an investment, not just as a building that stayed busy.
The term keeps showing up because return metrics translate rent, expense, and value into a language owners, lenders, and buyers all understand. Each metric strips away a different layer of noise, so using the wrong one can distort the story.
Use cases
Use Cap Rate to translate property operations into an investment result.
Review Cap Rate when the team needs to compare assets using a metric that matches the decision being made.
Track Cap Rate so operations can keep ownership discussions grounded in return, not just activity.