Money & Performance
Cap Rate Capitalization Rate
NOI divided by price — the unlevered yield of the building.
Why you care
Cap rates lie about short-term rentals. The metric assumes a stable income stream, and STR income is seasonal, management-intensive and regulation-sensitive. A 7% STR cap rate is not a 7% apartment cap rate.
Worked example
$30,800 NOI on a $420,000 purchase = 7.3%. Strip out a realistic management fee and a real reserve and the same house is closer to 5.5%.
Taught in Cash-on-Cash and Cap Rate