Cap rate

[Daniel Peavey]

hi

I bought a property in Atlanta area 5 years ago

Price 40k

Noi =7k

Cap rate = 17.5 percent

Question:  property is now paid off

Can I think and articulate , saying cap rate is now 100 percent??

[Darrell Shepherd]

What RJ said.  Cap rate means capitalization rate or basically how long it takes to get your money back.

A 17% cap rate means you got 17% of your investment back per year.  Its more used to value a property at purchase than to determine your true return on capital (which can fluctuate greatly with leverage and cost of money).