Real Estate Math
A property's capitalization rate is 8% and its net operating income (NOI) is $24,000. What is the estimated value using the income approach?
A$192,000
B$240,000
C$300,000✓ Correct
D$320,000
Explanation
Value = NOI ÷ Cap Rate = $24,000 ÷ 0.08 = $300,000.
People Also Study
Related Arkansas Questions
- A property generates a net operating income of $30,000 per year. Using a capitalization rate of 6%, what is the indicated value?Property Valuation
- A property's net operating income is $24,000. If the cap rate is 8%, what is the estimated value?Real Estate Math
- The capitalization rate (cap rate) in the income approach is used to:Property Valuation
- In the income approach to value, Net Operating Income (NOI) is calculated as:Property Valuation
- Direct capitalization in the income approach converts income into value by:Property Valuation
- A property earns $24,000 in net annual income. If the cap rate is 6%, what is the estimated value?Real Estate Math
- A commercial property has an NOI of $45,000 and a cap rate of 9%. What is its estimated value?Real Estate Math
- A property has a potential gross income of $120,000 annually, with a 6% vacancy rate and $30,000 in operating expenses. What is the NOI?Real Estate Math
Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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 Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →