Real Estate Math
Using the income capitalization approach, an Indiana property has a NOI of $55,000. Comparable properties sell at a 6.5% cap rate. What is the indicated value?
A$730,000
B$803,000
C$846,154✓ Correct
D$880,000
Explanation
Value = NOI ÷ Cap Rate = $55,000 ÷ 0.065 = $846,153.85 ≈ $846,154. To solve this, multiply the relevant values: $55,000 at 6.5%.. The correct answer is $846,154.. This is a common calculation on the Indiana real estate exam.
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