Real Estate Math
A Louisiana income property has an effective gross income of $96,000 and operating expenses of $38,400. The buyer wants a 7% return. What is the maximum purchase price the buyer should pay?
A$820,000
B$822,857✓ Correct
C$811,429
D$800,000
Explanation
NOI = EGI − Operating Expenses = $96,000 − $38,400 = $57,600. Maximum price = NOI ÷ Cap Rate = $57,600 ÷ 0.07 = $822,857.
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