Real Estate Math
A commercial property generates $180,000 in annual NOI. An investor wants a 9% return. What is the maximum price the investor should pay?
A$1,620,000
B$2,000,000✓ Correct
C$1,800,000
D$1,500,000
Explanation
Maximum price = NOI ÷ Required cap rate = $180,000 ÷ 0.09 = $2,000,000. To solve this, multiply the relevant values: $180,000 at 9%.. The correct answer is $2,000,000.. This is a common calculation on the Arkansas real estate exam.
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