A 4-unit apartment building in Sacramento has monthly rents of $1,500 per unit. The submarket vacancy rate is 5%. Annual operating expenses are $28,800. The prevailing cap rate for comparable properties is 6%. Using the income approach (direct capitalization), what is the estimated value of the property?
Correct Answer
C) $660,000
PGI $72,000 × 0.95 = EGI $68,400; NOI = $68,400 − $28,800 = $39,600; Value = $39,600 ÷ 0.06 = $660,000.
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