Real Estate Math
An Arizona investor's property has a cap rate of 8% and an annual NOI of $48,000. The investor is offered $650,000 for the property. Should they sell based on the cap rate?
A$600,000✓ Correct
BNo, because $650,000 is below the indicated value
CYes, because the cap rate exceeds the offering price by more than 5%
DNo determination can be made without additional data
Explanation
Indicated Value = NOI ÷ Cap Rate = $48,000 ÷ 0.08 = $600,000.
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