Real Estate Math
An investor purchases a rental property for $400,000. The annual NOI is $32,000. What is the cap rate?
A6%
B7%
C8%✓ Correct
D9%
Explanation
Cap rate = NOI ÷ Value × 100. $32,000 ÷ $400,000 = 0.08 = 8%. Using the values given ($400,000, $32,000), apply the appropriate formula.. The correct answer is 8%.. This is a common calculation on the Alabama real estate exam.
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