A property has an annual net operating income of $54,000 and a market capitalization rate of 6.5%. What value indication does direct capitalization produce?
Correct Answer
B) $830,769.23
Direct capitalization divides NOI by the cap rate: $54,000 ÷ 0.065 = $830,769.23.
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Related Topics & Key Terms
Key Terms:
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.
More Real Estate Math Questions
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A property sells for $245,000 with a total commission rate of 6%. What is the total commission earned?
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- → 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?
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- → 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)?
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