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Understanding Capitalization Rate
investopedia.com/terms/c/capitalizationrate.aspYapay zekadan makale özeti
- Definition and Calculation
- Capitalization rate measures expected return on commercial real estate investment
- Calculated by dividing net operating income by property asset value
- Formula: Net Operating Income / Current Market Value
- Key Characteristics
- Higher cap rate indicates lower risk but lower returns
- Good cap rate typically ranges between 4% and 10%
- Property location significantly affects cap rate
- Higher interest rates generally increase cap rates
- Limitations
- Does not consider leverage or time value of money
- Less reliable for properties with irregular cash flows
- Does not account for future risks like depreciation
- Should not be sole indicator of investment strength
- Factors Affecting Cap Rate
- Property type and location
- Tenant solvency and lease terms
- Market conditions and regional trends
- Property renovation and maintenance costs