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Metrics

Capitalization Rate (Cap Rate)

A property’s annual net operating income divided by its purchase price, expressed as a percentage.

Definition

Cap rate is a quick-measure return metric for income property. Formula: Net Operating Income (NOI) ÷ Purchase Price. A higher cap rate means more income per dollar invested but often indicates higher risk or a lower-demand market. Baltimore County rental cap rates typically range from 6-10% depending on neighborhood and asset class.

Example

NOI $18,000 ÷ Purchase $200,000 = 9% cap rate.

Related terms

Net Operating Income (NOI)

A property’s annual income minus all operating expenses, before mortgage payments and cape…

Cash-on-Cash Return

Annual pre-tax cash flow divided by total cash invested, expressed as a percentage.

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