📊 Real Estate Vocabulary: Capitalization Rate (Cap Rate) 🏢

The Capitalization Rate (Cap Rate) is a key metric used by investors to determine the potential return on a rental property. It’s calculated by dividing the net income (before debt) by the current market value of the property.

💡 Example: If an apartment building has a net income of $80,000 and is valued at $1,000,000, the Cap Rate would be:
📉 $80,000 ÷ $1,000,000 = 8% Cap Rate

🔹 A higher Cap Rate usually means a higher return (but may come with more risk).
🔹 A lower Cap Rate often indicates a more stable, lower-risk investment.

Thinking about investing in real estate? Understanding Cap Rates is a great place to start!

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