meaning of capitalization rate

capitalization rate meaning in Law Dictionary

For instance, if a building is paid for for $1,000,000 sale price plus it creates $100,000 in good net running income (the quantity left after fixed prices and variable prices are subtracted from gross rent earnings) during one year, then: *$100,000 / $1,000,000 = 0.10 = 10%

capitalization rate meaning in Business Dictionary

1. General: Discount (or interest) price familiar with figure out the current value of some future earnings from an investment. 2. Business valuation: Reciprocal associated with the desired price of return increased because of the normalized earnings of a business to arrive at its purchase price. 3. Property: Ratio of local rental earnings from a property to its market value, expressed as a percentage. This price is used in comparing rate of return from a residential property aided by the price of return from alternate investments.