A property produces annual NOI of $52,000 and is purchased for $700,000. What is the capitalization rate?
Correct Answer
B) 7.43%
Cap rate = $52,000 ÷ $700,000 = 0.0743, or 7.43%.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Real Estate Math Question
Background Knowledge for Real Estate Math
Real World Application in Real Estate Math
Common Mistakes to Avoid on Real Estate Math Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
Converting a percentage to a decimal involves dividing the percentage value by 100.
In real estate, property value can be estimated by dividing the Net Operating Income (NOI) by the Capitalization Rate (Cap Rate).
Proration is the process of dividing expenses or income between the buyer and seller at the closing of a real estate transaction. This ensures each party pays or receives only their fair share based on the period of ownership.
More Real Estate Math Questions
An income-producing property generates a net operating income (NOI) of $35,000 annually. Using a capitalization rate of 7%, what is the estimated value of the property?
A property sells for $275,000 with a 6% commission rate. What is the total commission earned?
A property sells for $245,000 with a total commission rate of 6%. What is the total commission earned?
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?
A lender uses a 28% front-end qualifying ratio. If a borrower's gross monthly income is $4,800, what is the maximum allowable monthly housing payment?
- → A borrower takes out an interest-only loan of $180,000 at an annual interest rate of 5%. What is the interest due for the first month?
- → Annual property taxes on a home are $2,400. The property closes on June 1. Using a 360-day banker's year and assuming taxes are paid in arrears, what is the amount the seller owes the buyer as a tax proration credit?
- → A buyer purchases a home for $200,000 and makes a 15% down payment. What is the loan amount?
- → A property is assessed at $190,000 with a mill rate of 20. What is the annual property tax?
- → A property sells for $220,000 and generates monthly gross rent of $1,600. What is the Gross Rent Multiplier (GRM)?
- → A property is purchased for $175,000 and appreciates at 4% per year compounded annually. What is the property's value after 2 years?
- → A property sells for $280,000. The listing broker charges a 3% commission and the buyer's broker charges 2.5%. The selling agent receives 65% of the buyer's broker commission. What does the selling agent earn?
- → A buyer purchases a home for $258,000 with a 20% down payment. What is the amount of the mortgage loan?
- → Annual property taxes are $3,600. The property closes on July 1 and taxes are paid in arrears. Using a 360-day year (30 days per month), what is the seller's proration debit (amount the seller owes the buyer at closing)?
- → A borrower takes out a $250,000 mortgage at a 5% annual interest rate. What is the interest portion of the first month's payment?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Related Articles
How to Study for the Real Estate Exam on Your Phone Without Losing Depth
How to Study Real Estate Vocabulary Without Memorizing Random Definitions
Essential Real Estate Math Formulas You Need to Know
Master the key math formulas for your real estate exam. Covers commission, prorations, area calculations, and more with step-by-step examples.