Overall capitalization rate is best defined as?

Overall capitalization rate is best defined as annual income compared to physical property value. This definition emphasizes that the overall capitalization rate is a fundamental concept in real estate appraisal and investment analysis, focusing on the relationship between the income a property generates and its market value. Specifically, it is calculated by dividing the property's net operating income (NOI) by its current market value or purchase price, resulting in a percentage that reflects the rate of return anticipated from the investment.

This measurement is crucial for investors and appraisers as it helps assess the profitability and viability of a property. Understanding the overall capitalization rate enables stakeholders to make informed decisions regarding property investments, financing, and valuation.

The other options do not accurately represent the overall capitalization rate. For example, while a measure of future income potential may be associated with various valuation methods, it does not specifically define the capitalization rate itself, which focuses on current income and property value. A financial tool for equity valuation also doesn't directly relate to how the overall capitalization rate is calculated or utilized in property assessments.