"Capitalization" is the process of changing future income into its equivalent current value. To do this, you must figure out the right "capitalization rate" (or "cap rate"). The cap rate is calculated by taking the "net operating income" and dividing it by the price for the income-producing property.
These are questions that the above text answers:
1. What is the definition of "capitalization" in real estate?
2. How is the "capitalization rate" (cap rate) calculated?
3. What is the role of the "net operating income" in determining the cap rate?
4. How is the cap rate used to convert future income into its current value?
5. What is the purpose of determining the cap rate in real estate investment analysis?
6. What factors are considered when calculating the cap rate?
7. How does the price of the income-producing property affect the cap rate?
8. What is the significance of the cap rate in real estate investment?
9. How does the cap rate help investors evaluate the profitability of an income-producing property?