What does capitalization rate mean?

Capitalization rate, also known as reduction rate or return rate, is an important indicator to measure the return on investment, which is usually used to evaluate the investment value of real estate and other real estate. The capitalization rate is calculated by dividing the annual net operating income (NOI) by the asset value of the property. For example, if you buy a house at a price of 6.5438+0 million yuan, it is estimated that the annual income from it will be 6.5438+0 million yuan, then the capitalization rate is 654.38+00%, that is, 654.38+00% of the annual value of the house. This ratio can help investors compare the profitability of different investment projects, or compare the profitability of different properties in the same city. Capitalization rate is different from bank interest rate, which refers to the interest rate of deposits or loans, and capitalization rate is a measure of the rate of return obtained after capital investment. Capitalization rate is usually used to evaluate the value of real estate, not the cost of deposits or loans.