What type of income does the cap rate include?

The correct choice emphasizes the understanding of cap rate, which stands for capitalization rate. This metric is critical in real estate valuation as it helps assess the return on an investment property relative to its value. The cap rate is calculated by dividing the net operating income (NOI) of the property by its current market value or purchase price.

In this context, the cap rate encompasses both the return on the investment (the income generated from the property, typically through rents) and the return of the investment (meaning the original capital is recovered). This dual aspect highlights the total performance of the property as an investment, rather than focusing solely on net income, rental income, or appraisal value.

While net income refers to the income after all expenses are deducted, and rental income specifically pertains to the money generated from leases, neither captures the entirety of the investment's return profile as comprehensively as the capitalization rate does. Likewise, appraisal value pertains to the worth of the property determined by an appraiser and does not reflect the income-producing capability.

Thus, the choice represents a holistic view of an investment's performance, making it the correct answer in the context of this question.