Real Estate Math (alternative)
A Maryland industrial property has a 6.2% cap rate and an asking price of $2,000,000. If the investor requires a minimum 7% cap rate, they would need to either renegotiate the price or require an NOI of:
A$124,000
B$140,000✓ Correct
C$148,000
D$180,000
Explanation
To achieve 7% cap rate at $2,000,000: Required NOI = $2,000,000 × 7% = $140,000. Alternatively, at $124,000 NOI (current), they would pay $124,000 ÷ 0.07 = $1,771,429.
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