Real Estate Math
A property's effective gross income is $95,000. Operating expenses are $42,000 (excluding debt service). The cap rate is 6.5%. What is the estimated property value?
AA. $1,461,538
BB. $800,000
CC. $1,250,000
DD. $815,385✓ Correct
Explanation
NOI = EGI − Operating Expenses = $95,000 − $42,000 = $53,000. Value = NOI ÷ Cap Rate = $53,000 ÷ 0.065 = $815,385.
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