What is a cap rate?
The capitalization rate, often just called the cap rate, is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.
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Sophie charges $7 per hour to clean a house. If she works 6 hours per day, how much does she earn per week?
Sophie earns a total of $42 per day ($7 * 6 hours). Sophie earns $294 per week ($42 * 7 days per week).