A commercial property in Calgary generates $120,000 annual net operating income. Using a capitalization rate of 8%, what is the estimated value using the income approach?
Correct Answer
B) $1,500,000
Using the income approach formula: Value = Net Operating Income ÷ Capitalization Rate. $120,000 ÷ 0.08 = $1,500,000. This method is commonly used for income-producing properties.
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Previous Question
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?
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A commercial property in Ontario generates $120,000 in net operating income annually. If similar properties in the area are selling at a 7% capitalization rate, what is the estimated value using the income approach?