Real Estate Math
An Arizona investor purchases a rental property for $320,000. Annual gross rents are $36,000, and annual expenses (taxes, insurance, maintenance, management) total $14,400. What is the property's cap rate?
A4.5%
B6.75%✓ Correct
C11.25%
D8.5%
Explanation
NOI = Gross Rents − Expenses = $36,000 − $14,400 = $21,600. Cap Rate = NOI ÷ Purchase Price = $21,600 ÷ $320,000 = 0.
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