cap rate clarification

[Tony G]

When calculating cap rates, i understand in the article below, ali boone advises us to NOT add the mortgage payment. If this is true, wouldn't the cap rate be 4.5% vs 9.7%?

358 x 12 = 4296 / 94500 = 4.5% (mortgage not added)

358 + 406 x 12 = 9168 / 94500 = 9.7% (mortgage added)

Any clarification would be much appreciated.

http://www.biggerpockets.com/renewsblog/2013/01/19/real-estate-math/

The Cap Rate equation:

Net Annual Income / Purchase Price = Cap Rate

NOTE: I don’t include the mortgage payment in this calculation.