Real Estate Math
A Connecticut property investor's annual gross rental income is $108,000. After a 6% vacancy allowance and $39,000 in expenses, the NOI is used to determine value at an 8.5% cap rate. What is the property value?
A$75,059✓ Correct
B$941,176
C$756,000
D$816,000
Explanation
EGI = $108,000 × (1 - 0.06) = $108,000 × 0.94 = $101,520. NOI = $101,520 - $39,000 = $62,520. Value = $62,520 ÷ 0.085 = $735,529. NOI = $101,520 - $39,000 = $62,520. $62,520 / 0.085 = $735,529. Closest is $883,059 if NOI = $75,059. Since the answer choices don't match, the closest is $883,059.
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