A duplex property generates $3,000 monthly rental income with annual expenses of $8,000. Using a capitalization rate of 6%, what is the estimated value using the income approach?
Correct Answer
A) $433,333
Net Operating Income = ($3,000 × 12) - $8,000 = $36,000 - $8,000 = $26,000. Value = NOI ÷ Cap Rate = $26,000 ÷ 0.06 = $433,333. The income approach divides net operating income by the capitalization rate to determine 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?
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A duplex property generates $3,000 monthly rental income with annual expenses of $8,000. Using a capitalization rate of 6%, what is the estimated value using the income approach?