An Alaska retail property has a base rent of $15/sq ft for 8,000 sq ft plus percentage rent of 5% of annual gross sales over $500,000. Tenant's gross sales are $750,000. What is the total annual rent?
Why $132,500 Is Correct
Answer B: $132,500
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
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Key Terms to Know
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
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