A rental property in Vancouver generates $4,000 monthly rent with annual operating expenses of $18,000. Using a capitalization rate of 5%, what is the estimated value using the income approach?
Correct Answer
B) $600,000
Net Operating Income = ($4,000 × 12) − $18,000 = $48,000 − $18,000 = $30,000. Property value = NOI ÷ cap rate = $30,000 ÷ 0.05 = $600,000.
Why This Is the Correct Answer
This answer is correct. Annual rent is $4,000 × 12 = $48,000. NOI is $48,000 − $18,000 = $30,000. Value is $30,000 ÷ 0.05 = $600,000.
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