# Cap Rate

*Real Estate — Finicade finance glossary*

The cap rate is a property's net operating income divided by its price — the unlevered yield if you bought it in cash. It's the primary valuation shorthand in commercial property, and it moves inversely to value: when cap rates rise, prices fall for identical income. Rates vary by asset quality and location, so a 4% cap in a prime market and an 8% cap in a secondary one can represent the same risk-adjusted deal.

**Formula:** `Cap rate = Net operating income ÷ Property value`

**Also known as:** capitalization rate, capitalisation rate, cap rate formula

**Related terms:** [Net Operating Income](https://finicade.com/glossary/net-operating-income), [Commercial Real Estate](https://finicade.com/glossary/commercial-real-estate), [Rental Yield](https://finicade.com/glossary/rental-yield), [Cash-on-Cash Return](https://finicade.com/glossary/cash-on-cash-return), [Gross Rent Multiplier](https://finicade.com/glossary/gross-rent-multiplier)

Source: https://finicade.com/glossary/cap-rate