what is the difference between the capitalization rate and return on investment 
return on investment indicates what the potential return of an investment could be over a specific time horizon the capitalization rate will tell you what the return of an investment is currently or what it should actually be the bottom linethe capitalization rate is used to measure the profitability of commercial rental properties a high cap rate indicates a relatively high income relative to the size of the initial investment however there are also other factors to consider such as risk and local market dynamics investors should be careful to consider a wide range of metrics in addition to the capitalization rate 