Real Estate Math
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?
A$560,000
B$800,000
C$1,142,857✓ Correct
D$1,600,000
Explanation
Value = NOI ÷ Cap Rate = $80,000 ÷ 0.07 = $1,142,857. To solve this, multiply the relevant values: $80,000 at 7%.. The correct answer is $1,142,857.. This is a common calculation on the Colorado real estate exam.
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