Real Estate Math
An investor purchases a rental property for $350,000. The property generates $36,000 per year in gross rent and $14,400 in annual expenses. What is the capitalization rate?
A5.5%
B6.17%✓ Correct
C6.5%
D8.0%
Explanation
NOI = Gross Rent − Expenses = $36,000 − $14,400 = $21,600. Cap Rate = NOI ÷ Purchase Price = $21,600 ÷ $350,000 ≈ 6.
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