Glossary
Cap Rate (capitalization rate)
Net operating income divided by property value: a financing-neutral measure of an asset's return that Japanese agents rarely quote.
Cap rate equals NOI (income after all operating costs but before mortgage) divided by asset value, which makes it comparable across leveraged and unleveraged deals and across countries. Japanese residential listings almost never use it; they quote gross yield (hyomen rimawari), which looks larger and hides the cost structure. The gap is the opportunity: a property pitched at 6 percent gross yield can carry a true cap rate near 3 percent once vacancy, HOA fees, repair reserve, and taxes come out. Central Tokyo residential runs roughly 2.5-3.5 percent, outer wards 4-5.5 percent, regional cities higher to compensate for liquidity risk. Use it to compare markets and to negotiate price backward from your required return. It deliberately ignores your loan, which is where cash-on-cash takes over.