Real Estate Math
A Hawaii 6-unit apartment building rents for $2,200/unit/month. The operating expense ratio is 45%. At a 7% cap rate, what is the value?
AA. $1,210,000
BB. $1,100,000✓ Correct
CC. $1,320,000
DD. $1,260,000
Explanation
Annual gross = 6 × $2,200 × 12 = $158,400. NOI = $158,400 × (1-0.
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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.
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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