Real Estate Math
A Kansas investor paid $275,000 for a property that generates $22,000 per year in NOI. After 3 years, the NOI grows to $25,000. The investor sells for $357,142. What is the exit cap rate?
A6.5%
B7%✓ Correct
C7.5%
D8%
Explanation
Exit cap rate = NOI at sale ÷ Sale price = $25,000 ÷ $357,142 = 0.07 = 7%. Using the values given ($275,000, $22,000), apply the appropriate formula.. The correct answer is 7%.. This is a common calculation on the Kansas real estate exam.
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