A property generates a net operating income (NOI) of $45,000. Using a capitalization rate of 9%, what is the estimated value of the property?
Correct Answer
C) $500,000
Using the income capitalization formula: Value = NOI ÷ Cap Rate. $45,000 ÷ 0.09 = $500,000. This formula is used in the income approach to appraisal to estimate the value of income-producing properties.
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Related Topics & Key Terms
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Related Concepts
Annual interest is the total amount of interest charged on a loan or investment over a year.
Area calculation involves determining the square footage or acreage of a property using geometric formulas. Key conversions: 1 acre = 43,560 square feet, 1 mile = 5,280 feet, 1 section = 640 acres.
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
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A property generates a net operating income (NOI) of $40,000 per year. Using a capitalization rate of 8%, what is the estimated value of the property?
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