Dictionary of Real Estate Terms: direct capitalization
direct capitalization
dividing the Net Operating Income by an overall capitalization rate to estimate value. Contrast with yield capitalization.
Example: Table 17.
| TABLE 17 DIRECT CAPITALIZATION | |
| Gross income | $100,000 |
| Operating expenses | - 40,000 |
| Net operating income | $ 60,000 |
| Capitalization rate | ÷ 0.12 |
| Value estimate | $500,000 |
