A Colorado commercial property has an asking price of $1,500,000 and generates $108,000 in NOI annually. A buyer believes the cap rate should be 7.5% to reflect current market risk. What price would the buyer offer based on their target cap rate?
Why A. $1,440,000 Is Correct
Answer A: A. $1,440,000
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.
People Also Study
Related Colorado Questions
- Using the income approach: a Colorado commercial property generates $80,000 NOI. Comparable properties sell at a 7% cap rate. What is the property's indicated value?Real Estate Math
- A Colorado seller lists their home at $550,000 and receives an offer for 96% of the list price. What is the offer price?Real Estate Math
- A Colorado broker has a listing at $389,000. An offer comes in at $375,000. At a 6% commission rate, what is the commission difference between list price and offer price?Real Estate Math
- A Colorado listing broker receives an offer significantly below asking price. The broker thinks it is a waste of time. The broker should:Agency
- A Colorado property has NOI of $90,000 and an asking price of $1,200,000. What is the cap rate?Real Estate Math
- In Colorado, a commercial lease with a 'CAM' (Common Area Maintenance) charge requires the tenant to pay their pro-rata share of:Property Management
- A Colorado appraiser uses the 'Income Capitalization' approach on a commercial property. The NOI is $85,000 and the market cap rate is 6.5%. What is the value?Property Valuation
- After passing the Colorado broker exam, how long does a candidate have to activate their license before the exam results expire?Colorado License Law
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.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
Study This Topic
Practice More Colorado Real Estate Questions
1,400+ questions covering all exam topics. Start free — no signup required.
Take the Free Colorado Quiz →