The cap rate is as stated, NOI/Purchase Price . In this example, it is 8.5%. You ask how they come up with 8.5%. I think the best way to explain is that it is a multiplier that is established by the market where a typical property trades at that value. Example, if you call a broker and say , hey , what are 400 lot parks trading for in this market of Denver CO? They might tell you that you would expect to buy at a 5 and a half cap.
Hope that helps.
Dont get blinded on buying on actuals, sometimes you can see a way to increase revenue, decrease expenses, that would far out way paying a premium in cap rate, evaluate the whole deal and the whole picture.