What Is Cap Rate in Real Estate? Simple Guide for New Investors
Jun 28, 2025
If you’ve ever searched for “how to analyze a real estate deal,” chances are you’ve seen the term Cap Rate.
But most of the definitions out there? Confusing. So here’s what you really need to know:
Cap Rate (short for Capitalization Rate) is a quick way to measure a property’s return — before financing.
It answers the question:
“If I bought this property in cash, what % return would I earn from the rent after expenses?”
Let’s say a property costs €100,000 and generates €6,000 a year in net income.
That’s a 6% Cap Rate. Simple as that.
π Why it matters:
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It helps you compare properties in different cities or markets
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It keeps you from overpaying for low-yielding rentals
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It gives you a quick filter before diving deeper into the numbers
Cap Rate isn’t the only metric — but it’s a powerful first step. Especially when you’re screening multiple listings or running the numbers on your own.
In my eBook and calculator, I show you exactly how to calculate it — and when it matters most.
Book your free call below β and letβs figure out the best path forward for you.
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