A commercial property generates $120,000 annual rental income with operating expenses of $30,000. Using a capitalisation rate of 7.5%, what is the indicated value?
Correct Answer
A) $1,200,000
Net operating income = $120,000 - $30,000 = $90,000. Using the capitalisation formula: Value = NOI ÷ Cap Rate = $90,000 ÷ 0.075 = $1,200,000.
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A commercial property generates $120,000 annual rent with operating expenses of $30,000. Using a capitalisation rate of 7.5%, what is the property's value using the capitalisation approach?
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