A capitalization rate (cap rate) measures an asset’s unleveraged initial yield and is calculated by dividing its Net Operating Income (NOI) by its current market value or purchase price. In high-growth states like Florida, analyzing cap rate trends across specific submarkets helps investors gauge market sentiment, relative risk, and compression velocities. Tracking cap rate movements relative to historical norms and macroeconomic interest rate shifts prevents investors from overpaying for assets in inflating submarkets and helps isolate properties with strong upside potential.