Real Estate Math
A Kansas commercial property generates gross annual income of $120,000. Operating expenses are 40% of gross income. The cap rate is 8%. What is the estimated value?
A$850,000
B$900,000✓ Correct
C$950,000
D$1,000,000
Explanation
Operating expenses = $120,000 × 0.40 = $48,000. NOI = $120,000 - $48,000 = $72,000. Value = $72,000 ÷ 0.08 = $900,000.
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