Cap Rate (Imóvel)

Cap Rate: pricing real estate by income

The capitalization rate tells you the unlevered annual yield of a property: Cap Rate = NOI / property price × 100%. NOI (Net Operating Income) is what's left when you take annual rental revenue and subtract operating expenses like property tax, insurance, maintenance, management and condo fees. The key detail is that this happens before mortgage interest and income tax. Take an apartment bought for R$ 400,000 that brings in R$ 30,000 of rent against R$ 6,000 of operating costs. Its NOI is R$ 24,000, which works out to a cap rate of 6.0%.

In the US market you'll typically see 4%–6% in core markets like NYC, San Francisco and prime Class A property, climbing to 8%–10% in secondary markets and value-add deals. Brazil runs higher: roughly 6%–10% residential and 8%–12% commercial. The number that really matters is how this compares against the risk-free rate, which in Brazil is Selic. A 6% cap rate when Selic sits at 12% only makes sense if you're betting on capital appreciation, expecting leverage gains, or buying for use value rather than yield.

Common applications

Appraisers lean on it to price commercial assets through the income approach. Investors use it to filter buy candidates, portfolio managers to flag holdings that are underperforming, and analysts as a quick screen for listed REITs and FIIs. Brokers will also back out an implied cap rate by dividing a comparable property's NOI by the price it actually sold for, and that figure feeds straight into direct-capitalization appraisals.

FAQ

Cap rate versus yield — are they the same? Not quite. Cap rate is built on NOI and ignores financing, gross rental yield uses gross rent before any expenses, and net yield lands closer to cap rate but often goes further by deducting financing or income tax. Whenever you see a number quoted, check which definition the source is actually using.

Should I include vacancy in NOI? Yes, if you want the stabilized version. Knock an expected vacancy loss of 5%–10% off gross rent before you work out operating expenses. The result is what people call stabilized NOI, and it gives you a more honest cap rate.

Higher cap rate is always better? No, and a 14% cap rate is usually a warning rather than a bargain. It tends to point to a rough neighborhood, shaky tenants, maintenance that's been put off, or leases that are about to end. Trophy assets in tier-1 cities trade down at 4%–5% precisely because their cash flow is something you can count on.