What a cap rate is telling you
A cap rate says how much annual operating income comes with each dollar of price. At an 8% cap rate, every $100 of price buys $8 of annual NOI before financing. It's a quick way to line income up against price, but it isn't your return.
Three ways to run the same math
Cap rate = NOI ÷ value. Flip it around and you also get value = NOI ÷ cap rate and NOI = value × cap rate. Type a percentage like 8 in the rate field and the math uses 0.08. California's Board of Equalization walks through the same income-capitalization relationship.
Make sure both NOIs mean the same thing
NOI is operating revenue minus operating expenses, before financing. Check how each source handles management, property taxes, insurance, recurring repairs, and reserves. A seller's projection and the income you can prove today give two different rates on the same price, so work from your own version.
Pick your comps, then poke at the answer
Start with completed sales you know enough about to see both the price and the income behind them. Property type, condition, location, leases, recent income changes, and what's included all move the rate. A higher rate can come from any one of those, so treat it as a question to chase down, not a better deal.
Loan payments, capital projects, income taxes, and whatever you sell for later sit outside this ratio. To build a cash-flow budget, carry your numbers into the storage, park, or rental property calculator.
Get the NOI right and this one ratio will sort a stack of listings in an afternoon.