6 Oct 2015 The cap rate is the yield on cost expressed as a % and is calculated as the [ Annual Adjusted NOI / Purchase Price]. as the overall return on that cash investment (i.e., “what you made”); IRR starts out infinitely negative… 21 Oct 2009 To determine whether leverage is positive (favorable) or negative (unfavorable), A first-year measure of return such as the overall capitalization rate can not be Because the NOI does not change when more debt is used, The capitalization rate, often just called the cap rate, is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property recently sold for $1,000,000 and had an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.