The cap rate is expressed as:

The capitalization rate, commonly known as the cap rate, is a key metric used in real estate to gauge the profitability and return on investment of a property. It is calculated by dividing the net operating income (NOI) of a property by its current market value or acquisition cost. The result is often expressed as a percentage, making it easier for investors to compare the potential returns of various properties.

Using a percentage format provides a clear and straightforward way to assess investment performance across different real estate assets. This makes it particularly useful for investors who want to analyze yields and make informed decisions regarding property purchases.

While dollar amounts may represent net income or total property value, they do not communicate the rate of return in a relatable fashion. Fixed and variable rates may describe other financial products or interest rates but do not accurately represent the cap rate's function in real estate evaluation. Thus, expressing cap rates as a percentage allows for effective comparisons and analyses of investment returns within the real estate market.