Real Estate MathCapitalization_rateMEDIUM
An investment property generates a Net Operating Income (NOI) of $40,000. Using a capitalization rate of 8%, what is the estimated value of the property?
Correct Answer
C) $500,000
Property value is estimated using the income capitalization formula: Value = NOI ÷ Cap Rate. $40,000 ÷ 0.08 = $500,000.
Answer Options
A
$400,000B
$450,000C
$500,000D
$550,000Why This Is the Correct Answer
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Background Knowledge for Real Estate Math
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Related Topics & Key Terms
Related Topics:
income approach to valuenet operating incomeappraisal methodsgross rent multiplier
Key Terms:
capitalization rateNOIincome approachproperty valuecap rate formula
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