Pencil Caps

It's an investment that should pencil cap rate of 10%? A guy is buying a property that tells me a ceiling rate of 10 percent over what? He said he make 20 percent capitalization rate in Mexico. He is buying a place in cash.

In other words, the ceiling rate is the net operating income divided by sales price or value of a property expressed as a percentage.

with a ceiling rate of 10%, the property would generate $ 100,000 $ 10,000 income

I do not know the "pencil" reference