Real Estate Math
A Massachusetts investment property generates an annual gross rent of $96,000. Operating expenses are 40% of gross rent. If the cap rate is 8%, what is the estimated value?
A$720,000✓ Correct
B$1,200,000
C$960,000
D$800,000
Explanation
NOI = $96,000 × (1 − 0.40) = $96,000 × 0.60 = $57,600. Value = $57,600 ÷ 0.08 = $720,000. To solve this, multiply the relevant values: $96,000 at 40%.. The correct answer is $720,000.. This is a common calculation on the Massachusetts real estate exam.
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