A property generates a net operating income (NOI) of $30,000 per year. Using a capitalization rate of 6%, what is the estimated property value?
Correct Answer
C) $500,000
Property value is estimated using the income capitalization formula: Value = NOI ÷ Cap Rate. Dividing the NOI by the capitalization rate gives: $30,000 ÷ 0.06 = $500,000.
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