Cap Rates, Explained Without the Jargon
The single number that prices a building.
A cap rate is net operating income divided by price. That is it. The mystique comes from what it implies, not from the arithmetic.
Yield Today, Bet on Tomorrow
A low cap rate means you are paying more for each dollar of income — usually a bet on growth. A high cap rate means more current yield, often for taking on more risk. The number encodes a view about the future.
When you hear cap rates 'expanded,' it means prices fell relative to income. That single movement explains most of the last two years in real estate.
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