Real Estate Math
A Florida commercial property generates an annual NOI of $90,000. A buyer requires a 9% return. Using direct capitalization, what is the maximum price the buyer should pay?
A$810,000
B$900,000
C$1,000,000✓ Correct
D$1,100,000
Explanation
Value = NOI ÷ Cap Rate = $90,000 ÷ 0.09 = $1,000,000. The buyer will pay no more than $1,000,000 to achieve their required 9% return on investment.
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