Real Estate Math
If a real estate investment generates $40,000 NOI annually and sells for $500,000 after 5 years, what cap rate did the investor achieve at purchase?
A7%
B8%✓ Correct
C10%
D12%
Explanation
Cap rate at purchase = NOI ÷ Purchase price. If the investor purchased at $500,000, cap rate = $40,000 ÷ $500,000 = 8%.
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