Capitalization Rate 

A ratio that can be used to estimate the value of income-producing properties. Put simply, a cap rate is the net operating income of an asset divided by its sales price or value expressed as a percentage. A cap rate is determined by evaluating the financial data of similar properties which have recently sold in a specific market. For example, a US$1-million sale price of an apartment building that produces an annual net cash flow of US$90,000, results in a calculated capitalization rate of 9 percent. [90,000/1,000,000 = .09]69