The short answer: cap rate = net operating income (annual income minus operating expenses, before the mortgage) divided by the purchase price. A $300,000 property with $21,000 of NOI has a 7 percent cap rate. It's a comparison tool, not the whole story.
How to calculate it
Add up annual rent, subtract real operating costs — insurance, property taxes after the non-homestead reset, management, maintenance, and vacancy — to get NOI, then divide by price. Note that NOI excludes your mortgage; that's where cash-on-cash return comes in.
Why Florida breaks naive cap rates
The single most common error here is using the seller's old insurance number or leaving it out. A real insurance quote can drop a cap rate by a full point or more. Taxes resetting to market do the same. That's why I run every deal with real numbers in the Investment Property Check rather than trusting a listing's pro forma.