Real Estate Math
An Indiana investment property has gross rents of $156,000, a 6% vacancy allowance, and operating expenses of $58,000. At a 7.5% cap rate, what is the property value?
A$1,181,867✓ Correct
B$1,200,000
C$1,296,000
D$1,368,000
Explanation
EGI = $156,000 × 0.94 = $146,640. NOI = $146,640 − $58,000 = $88,640. Value = $88,640 ÷ 0.075 = $1,181,867.075.06) = $156,000 × 0.94 = $146,640. NOI = $146,640 − $58,000 = $88,640. Value = $88,640 ÷ 0.075 = $1,181,867.
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