Real Estate Math
A commercial property generates $120,000 NOI. An investor requires a 6% cap rate. What is the maximum price the investor should pay?
A$1,500,000
B$1,800,000
C$2,000,000✓ Correct
D$2,400,000
Explanation
Value = NOI ÷ Cap rate = $120,000 ÷ 0.06 = $2,000,000. To solve this, multiply the relevant values: $120,000 at 6%.. The correct answer is $2,000,000.. This is a common calculation on the Connecticut real estate exam.
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