Real Estate Math
A Massachusetts apartment has 12 units renting at $1,600/month. Annual operating expenses are $86,400. At a cap rate of 7.5%, what is the property's value?
A$1,536,000
B$1,920,000✓ Correct
C$1,152,000
D$2,304,000
Explanation
Gross annual income = 12 × $1,600 × 12 = $230,400. NOI = $230,400 − $86,400 = $144,000. Value = $144,000 ÷ 0.075 = $1,920,000.075 = $1,920,000. The correct answer should be $1,920,000 (option B), but option A was marked as correct. Correcting: correct is index 1 ($1,920,000).
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