The cap rate, which is short for capitalization rate, allows an investor to estimate how long they will need to own a property before it generates enough money to pay for its acquisition. If an investor is looking at a rental home that is asking for $125,000 and they think they can rent it for around $1250 a month, then the would take the investment amount and divide it by the rent to see that they can expect a cap rate of 100 months or a cap rate of 8.3 years to recover their investment.