Real Estate Math
A building has an NOI of $80,000 and is purchased for $1,000,000. What is the cap rate?
A0.8%
B8%✓ Correct
C12.5%
D80%
Explanation
Cap Rate = NOI ÷ Property Value = $80,000 ÷ $1,000,000 = 0.08 = 8%. The cap rate reflects the rate of return generated by the property based on its income.
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