Real Estate Math
An apartment property has a gross scheduled income of $150,000, a 6% vacancy, and expenses of $55,000. If similar properties sell at a 7% cap rate and a 10x EGIM, what does the income approach indicate as value?
A$1,410,000✓ Correct
B$1,350,000 (both methods)
C$2,142,857
D$1,500,000
Explanation
EGI = $150,000 × (1-0.06) = $141,000. NOI = $141,000 - $55,000 = $86,000. Cap rate value = $86,000 ÷ 0.07 = $1,228,571. EGIM value = $141,000 × 10 = $1,410,000.
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