Real Estate Math
A Maine commercial property has a potential gross income of $200,000, vacancy of 5%, and operating expenses of $70,000. Using a 7% cap rate, the estimated value is:
A$1,714,286✓ Correct
B$1,929,000
C$2,000,000
D$2,143,000
Explanation
EGI = $200,000 × 0.95 = $190,000. NOI = $190,000 − $70,000 = $120,000. Value = $120,000 ÷ 0.07 = $1,714,286. Closest to $1,857,143 option but exact is $1,714,286.
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