Real Estate Math
A Colorado 10-unit apartment building sells for $1,500,000. Annual gross rents are $168,000 with a 5% vacancy rate and operating expenses of $60,000. What is the cap rate at the sale price?
A6.1%
B6.7%✓ Correct
C7.2%
D7.8%
Explanation
EGI = $168,000 × 0.95 = $159,600. NOI = $159,600 − $60,000 = $99,600. Cap rate = $99,600 / $1,500,000 = 6.64%, approximately 6.7%.
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