A property generates an NOI of $60,000. Comparable properties sell at a 5% cap rate. What is the indicated value using the income approach?
Why $1,200,000 Is Correct
Answer C: $1,200,000
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
People Also Study
Related California Questions
- A property generates annual gross rent of $96,000. If comparable properties sell at a GRM of 12 (annual), what is the estimated property value?Real Estate Math
- 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?Real Estate Math
- An income property has an NOI of $84,000. Comparable properties are selling at a 7% cap rate. What is the estimated value?Real Estate Math
- A property's NOI is $54,000 per year. A comparable property recently sold at a 7.5% cap rate. Using the income approach, what is this property's estimated value?Real Estate Math
- A 2,000 sq ft home in a neighborhood has a value of $400 per square foot based on comparable sales. Using the sales comparison approach, what is the indicated value?Property Valuation
- A property generates a net operating income of $50,000 and is valued using a 5% cap rate. What is the estimated value?Property Valuation
- An appraiser values a property using the sales comparison approach and finds that a comparable property has a swimming pool worth $15,000 but the subject property does not. What adjustment does the appraiser make?Property Valuation
- An appraiser is using the cost approach to value a 10-year-old building. The replacement cost new is $400,000 and the building has experienced 25% total depreciation. The land is valued at $120,000. What is the indicated value?Property Valuation
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
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →