A commercial property generates $120,000 in annual net operating income. Using a capitalization rate of 8%, what is the estimated property value using the income approach?
Correct Answer
C) $1,500,000
The income approach formula is: Property Value = Net Operating Income ÷ Capitalization Rate. Therefore: $120,000 ÷ 0.08 = $1,500,000. This method values income-producing properties based on their ability to generate revenue.
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A commercial property generates $120,000 in annual net operating income. If the capitalization rate for similar properties in the area is 8%, what is the estimated value using the income approach?
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