Real Estate Math

An Illinois property's NOI is $54,000 and the cap rate in the market is 7.2%. What is the indicated value?

A$648,000

B$750,000✓ Correct

C$703,000

D$389,000

Explanation

Value = NOI ÷ Cap Rate = $54,000 ÷ 0.072 = $750,000. The income capitalization formula converts the property's annual net operating income into a value estimate by dividing by the appropriate capitalization rate. The cap rate reflects the market's expectation of return for this type of property—a lower cap rate implies lower perceived risk and a higher price.

Related Illinois Real Estate Math Questions

An Illinois seller owes $185,000 on their mortgage. The property sells for $310,000. After paying a 5% commission and $4,200 in other closing costs, what are the seller's net proceeds?
A closing occurs on August 15. Annual property taxes of $5,400 have not been paid yet and will be paid by the buyer at year-end. Using a 360-day year (30-day months), how much is the seller's proration credit to the buyer?
A lender requires a borrower to maintain a debt-to-income ratio of no more than 43%. If the borrower's gross monthly income is $6,500, what is the maximum allowable total monthly debt payment?
A rental property has an annual gross income of $60,000, a vacancy and credit loss of 5%, and operating expenses of $18,000. What is the net operating income (NOI)?
A property was purchased for $480,000 and sold 4 years later for $556,800. What was the total percentage increase in value over the 4 years?
A buyer purchases a $425,000 home with a 15% down payment. If the lender charges 1.5 points at closing, how much is paid in points?
An investor buys a property for $500,000, puts $50,000 into improvements, then sells it for $620,000. The broker takes a 5% commission. What is the investor's net profit before taxes?
A buyer's mortgage payment is $1,850 per month, including principal, interest, taxes, and insurance (PITI). The lender requires a housing expense ratio (front-end ratio) of no more than 28%. What minimum gross monthly income does the buyer need?

Practice More Illinois Real Estate Questions

1,500+ questions covering all exam topics. Start free — no signup required.

Take the Free Illinois Quiz →