Property Valuation
The income capitalization approach divides NOI by the cap rate to find value. If a Des Moines apartment has an NOI of $85,000 and comparable properties sell at a 7% cap rate, what is the value?
A$1,100,000
B$1,150,000
C$1,214,286✓ Correct
D$1,285,714
Explanation
Value = NOI ÷ Cap rate = $85,000 ÷ 0.07 = $1,214,286. To solve this, multiply the relevant values: $85,000 at 7%.. The correct answer is $1,214,286.. This is a common calculation on the Iowa real estate exam.
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