Real Estate Math
An Iowa investor needs a 9% cap rate. A property generates $54,000 NOI. What is the maximum purchase price to achieve the target return?
A$600,000✓ Correct
B$486,000
C$540,000
D$666,667
Explanation
Maximum price = NOI / Cap Rate = $54,000 / 0.09 = $600,000. To solve this, multiply the relevant values: $54,000 at 9%.. The correct answer is $600,000.. This is a common calculation on the Iowa real estate exam.
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