Real Estate Math
A property's annual NOI is $36,000. Using a 7.5% cap rate, what is the estimated value?
A$420,000
B$460,000
C$480,000✓ Correct
D$510,000
Explanation
Value = NOI ÷ Cap Rate = $36,000 ÷ 0.075 = $480,000.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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