Real Estate Math
A Hawaii commercial building was purchased for $2,400,000 and generates $192,000 in NOI. What is the overall capitalization rate?
AA. 7%
BB. 8%✓ Correct
CC. 9%
DD. 10%
Explanation
Cap Rate = NOI / Purchase Price = $192,000 / $2,400,000 = 0.08 = 8%. Using the values given ($2,400,000, $192,000), apply the appropriate formula.. The correct answer is B. 8%.. This is a common calculation on the Hawaii real estate exam.
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