Math and Finance nerds need your help! CAP rate calc

[Kate Andreeva]

Trying to calculate Cap rate for the primary residence I hold that I am trying to convert to a rental property.

Here are the numbers:

Original purchase price: $400K

Current value: $600K

Current loan amount: $300K

Planning to do a cash out refi to pull out $150K for a purchase of a new primary residence.

The expected gross rent is $3.5K per month.

Annual expected gross operating income: $40K

Annual expected cost (taxes, HOA, insurance, CapEx, maintenance, management): $20K

Net Operating income: $20K

To calculate cap rate what do I divide $20K by?

a) original loan amount of $400K, b) current value of $600K or c) new loan amount of $450K after $150K cash out refi or d) current loan amount of $300K.

Appreciate your thoughts on this!