Real Estate Math
A commercial building in Chicago has a net operating income (NOI) of $150,000 per year. If the capitalization rate in that market is 6%, what is the estimated value of the property?
A$900,000
B$1,500,000
C$2,500,000✓ Correct
D$9,000,000
Explanation
Value = NOI ÷ Cap Rate = $150,000 ÷ 0.06 = $2,500,000.
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