Cap Rate (Capitalization Rate)

Definition

A US real estate indicator used to value rental properties. Cap Rate = NOI (Net Operating Income) / market value. NOI is net income after operating expenses (taxes, management, vacancy) but before debt service and depreciation. A high cap rate indicates a profitable property but often carries higher risk. In Thailand, cap rates typically range from 5 to 9% for residential properties and 7 to 12% for commercial properties. A highly useful tool for quickly comparing investment opportunities.