What is a Cap Rate?

Watch as Scott Williams, Managing Director, discusses the importance of understanding cap rate metrics in commercial real estate!

A cap rate is a ratio shown as a percentage of a property’s net operating income (NOI) divided by its value, or in the case of acquisitions, its purchase price. The lower the cap rate is, the higher the value or purchase price will be. A cap rate is one of the most important metrics we use in commercial real estate because it’s the primary metric we use to determine both value and purchase price, which conclusively equates to equity or net worth or even returns for investments.

If you have any questions on what the current cap rate is on an asset you may be interested in, don’t hesitate to reach out to one of our experts here at Aline Capital.

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