Real Estate Math
A Florida property generates $3,500/month gross rent. Annual operating expenses are $16,800. If the cap rate is 6.5%, what is the value?
A$387,692✓ Correct
B$510,000
C$550,000
D$476,923
Explanation
Annual gross rent = $3,500 × 12 = $42,000. NOI = $42,000 − $16,800 = $25,200.
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Key Terms to Know
Capitalization Rate (Cap Rate)
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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