A commercial property generates $180,000 in gross rental income annually. Operating expenses are $45,000, and the property is valued using a 7% capitalization rate. What is the indicated value using the income approach?
Correct Answer
A) $1,928,571
Using the income approach: Net Operating Income = $180,000 - $45,000 = $135,000. Value = NOI ÷ Cap Rate = $135,000 ÷ 0.07 = $1,928,571. This method is fundamental for valuing income-producing commercial properties.
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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?
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A commercial property has a gross rental income of $120,000 annually, operating expenses of $35,000, and comparable properties are selling at a 7.5% cap rate. Using the income approach, what is the estimated property value?