Real Estate MathIntermediateAlabama Exam

If a property's cap rate is 9% and the NOI is $54,000, what is the value? If NOI increases to $60,000, what is the new value?

Q: If a property's cap rate is 9% and the NOI is $54,000, what is the value? If NOI increases to $60,000, what is the new value?

At $54,000: $54,000 ÷ 0.09 = $600,000. At $60,000: $60,000 ÷ 0.09 = $666,667. To solve this, multiply the relevant values: $54,000, and $60,000, at 9%.. The correct answer is $666,667.. This is a common calculation on the Alabama real estate exam.

A$666,667Correct

B$540,000 / $600,000

C$486,000 / $540,000

D$594,000 / $660,000

Why $666,667 Is Correct

Answer A: $666,667

At $54,000: $54,000 ÷ 0.09 = $600,000.

Exam Tip: Real Estate Math

Math questions are formula-based. Memorize the key formulas: commission splits, proration, cap rate (NOI ÷ Value), GRM (Price ÷ Gross Rent), and LTV (Loan ÷ Value). Practice converting between annual and monthly figures.

People Also Study

Key Terms to Know

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Net Operating Income (NOI)

The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Math Concepts

Capitalization Rate Net Operating Income

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