Cap Rate (Capitalization Rate)
The cap rate is net operating income divided by price — the going-in yield of a real estate deal. Here's how it works and where the broker number bends.
Cap rate (capitalization rate) is the going-in yield of a property: NOI ÷ price. A $1,000,000 asset throwing off $60,000 of net operating income trades at a 6% cap. It's the fastest way to compare deals — but only if the NOI is honest.
Why it matters: a higher cap rate means cheaper relative to income (better for a buyer); a lower cap rate means more expensive. But the headline cap in an offering memo is usually the broker cap — computed on gross NOI before reserves and real landlord costs. Always separate the broker cap from the true cap before you trust it.
UpsideIQ shows both side by side on every deal — see the broker vs true cap guide or calculate it free. Set your target cap once and every deal is graded against it.
See it on a real deal — free
Tell UpsideIQ your investment criteria once — every deal gets analyzed, graded, and flagged against YOUR targets, not a generic score.
Related terms & guides