Capitalization Rate (Cap Rate)

A rate of return of a rental vehicle based on comparing the yearly net operating income (NOI) to the purchase price or market value.

Since the cap rate does not take into account loan payments, it can be used to compare rental vehicles irrespective of financing terms.

 

How Is It Calculated?

Using Purchase Price:
Cap Rate = Yearly NOI / Purchase Price
 
Using Market Value:
Cap Rate = Yearly NOI / Market Value

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