Real Estate Math
A Kansas office building generates $180,000 in annual gross rent. Operating expenses equal 35% of gross. Using an 8.5% cap rate, what is the estimated value?
A$1,235,294
B$1,376,471✓ Correct
C$1,500,000
D$1,741,176
Explanation
NOI = $180,000 × (1 - 0.35) = $180,000 × 0.65 = $117,000. Value = $117,000 ÷ 0.085 = $1,376,471. To solve this, multiply the relevant values: $180,000 at 35%.. The correct answer is $1,376,471.. This is a common calculation on the Kansas real estate exam.
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