How do I calculate the capitalization?
Calculating capitalization can help you evaluate the yield of a real estate investment property. The most commonly used metric for this is the cap rate, which is calculated by dividing the Net Operating Income (NOI) by the current market value of the property. The formula is:
Cap Rate = NOI/Market Value
It's important to note that real estate investors typically use cap rates to compare the relative value of different properties and it is not a measure of absolute performance. To help you calculate the cap rate, you can use common spreadsheet programs like Sourcetable.