Cap Rate Variations Everyone in real estate knows how to calculate a cap rate — or do they?
Commercial real estate professionals live and breathe capitalization rates. Every trade publication, market participant, and third-party report relating to real estate quotes cap rates for various markets and properties. But ask a group of real estate professionals to calculate a specific property’s cap rate and you are likely to get a variety of answers – despite the simplicity of the formula. If cap rates are widely used and easily calculated, then why does everyone come up with a different answer?