A commercial property has an annual NOI of $105,600 and comparable properties are selling at a 7% cap rate. What is the property's value using the income approach?
Why $1,508,571 Is Correct
Answer B: $1,508,571
Exam Tip: Real Estate Math
Math questions are formula-based. Memorize the key formulas: commission splits, proration, cap rate (NOI ÷ Value), GRM (Price ÷ Gross Rent), and LTV (Loan ÷ Value). Practice converting between annual and monthly figures.
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Key Terms to Know
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Math Concepts
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