What is the equity cap rate (Re) a ratio of?

The equity cap rate, represented as Re, is a ratio that measures the relationship between annual equity income and equity value. This is essential in evaluating the performance of an investment property from the perspective of the equity holder. It helps investors determine the expected return on their investment relative to the value they hold in the property.

When calculating the equity cap rate, the income generated specifically from the equity portion of the investment is used, which is distinct from the overall property income that includes debt service and other forms of income. This specific focus on equity income provides insight into how effectively the investment is performing for the equity investors, allowing them to make informed decisions based on their return expectations.

Understanding this concept is crucial for a tax assessor, as it aids in accurate assessments of property values and investment potentials. The other choices focus on different financial ratios that do not specifically address equity income or make direct comparisons to equity value, which is critical to defining the equity cap rate accurately.