Yield

Yield is the income an investment produces over a year, expressed as a percent of its price or value. A cap rate is a yield: net operating income divided by price. Real estate analysts sometimes call it the initial yield or going-in yield for that reason.

Framing cap rate as a yield makes it comparable with other income investments. The example property yields 5.78% before financing and income tax, which an investor can set against the yield on bonds, dividend stocks or a savings account, while keeping in mind that property yields come with vacancies, repairs and management work.

Yield ignores growth and the eventual sale. Two properties with the same 5.78% yield can produce very different total returns if one's rents rise faster. For a measure that includes both, see internal rate of return.