In Argus Enterprise, what does "Cap Rate" signify?

"Cap Rate," short for capitalization rate, is a key metric used in real estate to indicate the expected rate of return on an investment property. It signifies the ratio of Net Operating Income (NOI) to the property value. Essentially, the cap rate provides insight into the potential profitability of a property; it is calculated by dividing the annual NOI by the current market value or purchase price of the property.

For instance, if a property generates an NOI of $50,000 and its market value is $500,000, the cap rate would be 10%, indicating that an investor could expect a 10% return on their investment based on the current income stream the property generates. This metric helps investors compare the profitability of various investment properties and assess the potential return on their investments.

The other options do not accurately define cap rate. The total value of all assets pertains to overall portfolio valuation rather than the specific return metric that cap rate provides. The price at which properties are bought reflects transaction values rather than income derived from properties. Finally, the standard interest rate for real estate loans is related to financing costs, not the income-generating performance of the investment itself.