For example, if a building is purchased for $1,000,000 sale price and it produces $100,000 in positive net operating income (the amount left over after fixed costs and variable costs are subtracted from gross lease income) during one year, then: *$100,000 / $1,000,000 = 0.10 = 10%

More On This Topic

Link to This Definition
Did you find this definition of CAPITALIZATION RATE helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary