Real Estate Math
An investor pays $850,000 for a commercial property. The property generates $72,250 in annual net operating income. What is the cap rate?
AA. 8.5%✓ Correct
BB. 7.5%
CC. 9%
DD. 8%
Explanation
Cap rate = NOI ÷ Value = $72,250 ÷ $850,000 = 0.085 = 8.5%. Using the values given ($850,000, $72,250), apply the appropriate formula.. The correct answer is A. 8.5%.. This is a common calculation on the Georgia real estate exam.
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