Cap Rate (Capitalisation Rate)
Stabilised net operating income divided by property value, or rearranged, the rate at which a property’s NOI is capitalised into a price. A market input read from comparable transactions, not an output of a model. $5m of NOI at 5.0% is $100m; at 6.0% it is $83m, which is why the cap rate sensitivity is the most material table in any real estate model.
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