Cap Rate (Capitalization Rate)
A property's annual net operating income divided by its market value, expressed as a percentage. A $400K property with $32K NOI has an 8% cap rate. Used to compare investment yields across properties and markets.
Why it matters on a DSCR loan
Cap rate is your acquisition screening tool, but don't confuse it with DSCR — cap rate ignores financing entirely, while DSCR is all about whether rent covers the specific loan you're taking. A property can show an attractive cap rate and still fail DSCR if taxes, insurance, or HOA dues push PITIA above the rent. Use cap rate to compare markets and deals, then run the DSCR math on your actual loan terms before assuming the deal finances.
Related terms
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DSCR Calculator Get a QuoteReviewed by Arin Baghermian, Broker Owner — NMLS #1220456 · Last reviewed July 2, 2026 · DSCR Capital Partners is a brand of UTM Financial, LLC (NMLS #2591548).