A property sold for $450,000 and generates annual net operating income of $27,000. What is the capitalization rate?
Correct Answer
B) 6.0%
The capitalization rate is calculated by dividing the net operating income by the sale price: $27,000 ÷ $450,000 = 0.06 or 6.0%. This rate represents the annual return on investment for the property.
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