Capitalization rate (cap rate)
The unlevered annual return an income property produces: net operating income divided by its value or purchase price.
In plain terms
A property generating $20,000 of NOI on a $300,000 price has a 6.67% cap rate. Cap rate ignores financing, so it compares properties on an equal footing — but it also cannot tell you whether a deal cash-flows with a loan. Compute it with the cap rate calculator.