Valuation
Capitalization Rate
A concise definition for the California Real Estate Exam study guide.
Definition
Cap Rate = NOI ÷ Value. Expresses the relationship between NOI and value. Higher cap rate = lower value (for same NOI). Used in direct capitalization: Value = NOI ÷ Cap Rate.
Why it matters on the California real estate exam
Know the definition, recognize how the term appears in a fact pattern, and compare it with related concepts before choosing an answer.
Study this topic in context
Read the related chapter for the surrounding concepts, examples, and exam tips.
Chapter 6: Valuation & Appraisal →