Real Estate Math
An Arizona rental property generates $24,000 annually. Operating expenses total $9,600. The property is valued at $200,000. What is the overall capitalization rate?
A7.2%✓ Correct
B12%
C4.8%
D8%
Explanation
NOI = $24,000 - $9,600 = $14,400. Cap Rate = NOI ÷ Value = $14,400 ÷ $200,000 = 0.
People Also Study
Related Arizona Questions
- An Arizona property produces a Net Operating Income (NOI) of $120,000 per year. Using a capitalization rate of 6%, what is the estimated value?Property Valuation
- In the income approach, a property generates $36,000 annual net operating income (NOI). If the capitalization rate is 6%, what is the estimated value?Property Valuation
- An appraiser values an Arizona commercial property using a cap rate of 7% and an NOI of $63,000. What is the indicated value?Property Valuation
- An Arizona property has annual gross income of $96,000, vacancies of 8%, and operating expenses of $32,000. If the cap rate is 7%, what is the value?Real Estate Math
- An Arizona property has a potential gross income of $108,000, a 6% vacancy rate, and $36,000 in operating expenses. If properties in the area sell at a 7.5% cap rate, what is the estimated value?Real Estate Math
- A 20-unit Arizona apartment building has an average monthly rent of $1,100 and an 8% vacancy rate. Annual operating expenses are $85,000. At a 6.5% cap rate, what is the property's value?Real Estate Math
- An Arizona appraiser using the income approach to value a commercial property calculates a capitalization rate of 7%. If the net operating income (NOI) is $105,000, what is the estimated property value?Property Valuation
- 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?Real Estate Math
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.
AmortizationThe 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
Study This Topic
Practice More Arizona Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arizona Quiz →