Use of Cap Rates for Transaction Pricing
February 6th, 2021
The capitalization rate or overall rate (OAR) is a fundamental metric used by investors, brokers, and lenders to determine transaction pricing (the price at which the deal gets done). The cap rate is determined by dividing the NOI by the transaction price or projected value (cap rate =NOI/value). Moreover, a property value can be determined by dividing the NOI by the cap rate (val ...