Real Estate Math
A property in Baton Rouge produces a net operating income of $45,000. If the capitalization rate is 7.5%, what is the estimated value?
A$450,000
B$550,000
C$600,000✓ Correct
D$337,500
Explanation
Value = NOI ÷ Cap Rate = $45,000 ÷ 0.075 = $600,000. To solve this, multiply the relevant values: $45,000 at 7.5%.. The correct answer is $600,000.. This is a common calculation on the Louisiana real estate exam.
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