What Is Cap Rate in Real Estate?

Capitalization rate, is a vital metric for Real Estate investors, representing the ratio of a property's net income to its purchase price.Calculating cap rate involves 3 steps:

1- Determining annual rent
2- Subtracting annual expenses
3- Dividing the net income by the property's purchase price
The higher the cap rate, the better, with 4% being the minimum considered acceptable for most investors.