Definition of "Income yield"

Karen  Reed real estate agent

Written by

Karen Reedelite badge icon

First Weber Realtors

Same as term capitalization rate: Also called cap rate or income yield. A useful way to compute the rate of return on a real estate investment. It equals the net operating income (NOI) for the first year divided by the total investment. That interest rate that, when applied to the earnings of an investment, determines its market value. The lower the cap rate, the higher the risk to the investor and the higher the asking price. Whether property is overpriced depends on the rate for similar property in the market. There are two drawbacks to this approach; it is based on only the first year's NOI, and it ignores the appreciation in property value.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Highest amount a property is worth equal to the amount that would have to be paid to buy equivalent property in the market place. ...

Maximum interest rates a borrower might pay for an adjustable rate mortgage. It controls the amount of change in the rate when it adjusts. The first number is the maximum increase allowed ...

An affiliate of the National Association of Real Estate Boards, engaged in educational programs and publications for its members. Its publications include Real Estate Perspectives and Real ...

Prepayment to a landlord for refurbishing the unit beyond what would be anticipated from customary wear and tear. It is like a damage deposit. The security deposit may be refunded at the ...

Fee a borrower is assessed for the right to make a loan payment before the due date. An example is the prepayment charge for paying-off a mortgage early. ...

Partially amortized and requiring a lump sum (balloon) payment at maturity. ...

The amount of rent a property could command in the open market. See also market rent. ...

Right to enter and start construction or furnishing property that is in the process of being purchased. ...

The definition of cooperative housing is well known by real estate agents because they are often involved in the selling process, in most cases. Cooperative housing is a form of ...

Popular Real Estate Questions