The going-in cap rate divides a property's projected net operating income for the first year of ownership by its purchase price, giving buyers a snapshot of the return an asset generates on day one before any operational improvements or rent growth take hold. It is the acquisition-side counterpart to the exit cap rate used at disposition.
Because it is anchored to current, in-place income rather than a stabilized future projection, the going-in cap rate tends to run lower for value-add or lease-up deals, where income is expected to grow meaningfully over the hold period, and higher for stabilized, income-producing assets with limited upside. Investors reviewing a deal generally weigh the going-in cap rate alongside broader context on how cap rates are determined to judge whether the entry pricing looks attractive relative to the asset's risk profile and growth trajectory.
Further reading: Understanding Cap Rates: Context Cycles and the Real Measure of Value
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