A duplex generates $3,000 of monthly rental income with annual operating expenses of $8,000. Using a capitalization rate of 6%, what is the estimated value using the income approach, rounded to the nearest dollar?
Correct Answer
A) $466,667
Net operating income = ($3,000 × 12) − $8,000 = $36,000 − $8,000 = $28,000. Value = NOI ÷ cap rate = $28,000 ÷ 0.06 = $466,667.
Why This Is the Correct Answer
NOI is $36,000 − $8,000 = $28,000, and $28,000 ÷ 0.06 = $466,667.
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